The Chinese yuan was trading just 0.1 percent above April’s low following the central bank’s reduction of the currency’s reference rate in order to arrest further economic slowdown.
The currency fell 0.08 percent to 6.2242 per dollar at the close of trade in Shanghai, based on data from China Foreign Exchange Trading System. The spot rate was discounted 1.05 percent to the Peoples’ Bank of China (PBOC) daily reference rate, which was lowered 0.02 percent to 6.1586.
The yuan, which is allowed to shift 2 percent to either side of the benchmark rate, has plunged 0.21 percent this week, touching 6.2298 on Thursday, its lowest since the end of March.
“The yuan is under pressure to weaken amid concern about the Chinese growth,” Tsutomu Soma, a Tokyo-based, a fixed-income business unit manager at Rakuten Securities Inc. told Bloomberg. “Monetary authorities are also making sure that investors will see two-way moves in preparation for the internationalization of the currency.”
The yuan was hurt by weak economic data which showed that the gross domestic product advanced the lowest in six quarters in the quarter ending March. The GDP advanced 7.4 percent over the period from a year ago, down from 7.7 percent in the fourth quarter of 2013. Home prices in all Chinese urban cities grew at a much slower pace last month, according to a report released on Friday by the National Bureau of Statistics.
The yuan’s one-month implied volatility, which measures the expected movements in the exchange rate used to price options, plunged 0.08 percentage point, or eight basis points, on Friday to 1.96 percent. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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