Yuan exchange rate hits 6-year low amid volatility of other currencies
Updated: 2016-10-11 07:17
By WANG YANFEI(China Daily)
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A clerk counts 100 yuan banknotes at a branch of China Construction Bank in Nantong, East China's Jiangsu province, Sep 21, 2016. [Photo/VCG] |
Experts see no long-term depreciation of the yuan, following the central bank's fixing of the currency's central parity rate at the weakest level in six years on the first trading day after a weeklong holiday.
The People's Bank of China set the midpoint of the currency at 6.7008 against the US dollar on Monday, which is the weakest level since September 2010 and about 0.3 percent weaker than on Sept 30, the last trading day before the National Day holiday.
Analysts attributed the fluctuation to the strong volatility of other major currencies in the past week, especially the British pound, and rising market expectations of a possible interest rate hike by the US Federal Reserve by year's end.
The pound fell unexpectedly by more than 6 percent against the dollar on Friday.
"The offshore yuan, as a risk asset, cannot be divorced from the pound's impact," said Wang Youxin, an economist at the Institute of International Finance, a think tank affiliated with the Bank of China. Wang added that the depreciation pressure would be transferred to the onshore yuan.
Recent strong data from the United States raised expectations for a rate hike and also strengthened the dollar.
The nonmanufacturing purchasing managers index in the United States rose to 57.1 in September, the highest level in a year, and the manufacturing PMI went back to the expansion range during the same period.
But depreciation of the yuan would not be long-lasting, according to Xie Yaxuan, chief economist at China Merchants Securities Co.
He played down speculation that the central bank would allow for 6.8 yuan per dollar by the end of this year.
"The depreciation of the yuan is quite natural, with the recent stronger US dollar," said Xie. "It is only a reflection of its two-way volatility. As China steps up efforts to open its domestic capital market coupled with progress made in the internationalization of yuan, market expectations will be more stable," he said.
Guan Tao, a senior official at the central bank, said that the fluctuation of the yuan shows that exchange rate reform is moving toward a more market-oriented mechanism.
"With signs of China's economy ticking up appearing in the past few months, the currency lacks fundamentals for long term deprecation," said Wang. "The exchange rate will not deviate too much from its current level."
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