PBoC sets CNY fixing at 6.7671
|The Chinese yuan printed a fresh multi-month low on Friday amid heighten worries about the stability of the Chinese economy and the potential negative effects of the trade war with the US. The offshore rate fell as much as 0.65% with USD/CNH climbing as high as 6.8367. In the onshore market, the yuan were slight more moderate with USD/CNY climbing 0.60% to 6.8149. However, the sell-off was short-lived as both rates returned to the closing prices of the previous day. According to the latest rumours, the yuan’s turnaround could be explained by the sale of a large amount of USD by a Chinese bank.
On a trade-weighted basis, the yuan experienced its worst day since June 19 - when it lost 0.60%. So far, the yuan fell 0.52% after the PBoC set the USD/CNY at 6.7671, the lowest level since July 14, 2017. The persistent weakness in the yuan has spark fears about capital flight similar to what happened through 2015 and 2106 when the Chinese currency fell more than 13% against the greenback.
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The trade war initiated by Donald Trump came at the worst possible moment for China as the country started the process to deleverage its economy. Against such a backdrop, further weakness in the yuan against the dollar should be expected.
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