(Bloomberg) -- China’s yuan ended a record slump against its peers after the central bank set the fixing at a stronger-than-expected level for a third day.
The Bloomberg replica of the CFETS RMB Index, which tracks the yuan versus a basket of 24 trading partners’ currencies, rose for the first time in sixteen sessions. The People’s Bank of China set its daily fix at 6.8992 a dollar on Wednesday. That was stronger than the 6.9063 average of forecasts by 21 traders and analysts surveyed by Bloomberg.
The central bank’s recent fixings have helped stabilize the currency amid rising trade tensions with the U.S. The yuan has tumbled about 2.6% this month, making it one of the world’s worst-performing major currencies. It weakened again Wednesday as people familiar with the matter said the U.S. is considering cutting off the flow of vital American technology to as many as five Chinese companies.
Earlier this week State Administration of Foreign Exchange head Pan Gongsheng said China has the experience and policy tools to cope with fluctuations in the forex market.
A fixing below the 6.9 level once again shows China’s policy makers really don’t want the currency to weaken beyond that level, said Khoon Goh, head of Asia research at Australia & New Zealand Banking Corp. “This is the counter-cyclical adjustment measure that Pan Gongsheng was talking about.”
The yuan’s recent slide has investors wondering whether it will breach 7 per dollar for the first time since the financial crisis. Citigroup Inc. has said the PBOC will keep the currency stronger than that level to maintain stability in its financial markets.
China has said it won’t devalue the currency to make its exports more competitive, while a weaker yuan is already hurting foreign inflows to China’s bonds and stocks. Outflows from China’s equities via trading links with Hong Kong are in line to set a monthly record in May.
The Bloomberg CFETS RMB Index Tracker rose 0.05% to 93.64 on Wednesday. It retreated 2.2% during its 15-session slide, while a dollar gauge was little changed.
The yuan slipped 0.16% to 6.9136 a dollar as of 12:56 p.m. in Shanghai. The offshore rate erased earlier gains, losing 0.05% to 6.9372.
(Updates prices throughout.)
To contact the reporters on this story: Livia Yap in Singapore at lyap14@bloomberg.net;Ran Li in Beijing at rli279@bloomberg.net
To contact the editors responsible for this story: Sofia Horta e Costa at shortaecosta@bloomberg.net, Philip Glamann, David Watkins
©2019 Bloomberg L.P.
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