The yuan extended its losses for the fourth consecutive month at more than seven years as its economy slows down and the central bank reduced the renminbi’s daily reference rate.
The yuan has declined 0.66 percent in April and 0.0.2 percent on Wednesday to 6.2593 per dollar, according to China Foreign Exchange Trading System data. The currency has plunged 3.3 percent since January, its longest losing streak since 2007. Chinese financial markets will be closed on Thursday and Friday for holidays.
“The yuan’s decline isn’t over, and the economy isn’t going to improve much in the short term,” said Bruce Yam, a currency strategist at Sun Hung Kai Forex in Hong Kong told Bloomberg. “The PBOC is comfortable with the yuan’s current levels and even a further decline.”
The yuan hit 6.2676, its lowest level since October 2012, after the People’s Bank of China reduced the yuan’s reference rate to 6.1580, its first time to do so in six days. PBOC reduced the yuan’s daily fix by 0.1 percent this month, making it the worst performing currency in Asia this year.
The Chinese currency was trading at a 1.65 percent discount to the daily benchmark rate, well within the maximum cap of 2 percent set by the government.
The yuan’s one-month implied volatility, which measures the expected shifts in the exchange rate that is used to assign prices to options, declined 0.01 percentage point, or one basis point, to 2.10 percent to April.
Chinese economy grew at 7.4 percent in the first quarter, the slowest in six quarters. Preliminary data by a private firm indicated that manufacturing declined for the fourth straight month. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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