China's yuan dips to 3-1/2-month low, central bank vows support
By Summer Zhen
HONG KONG, Nov 22 (Reuters) -China's yuan edged down to a 3-1/2-month-low against the dollar on Friday, though losses were contained by the continued support offered by the Chinese central bank's daily guidance.
A central bank official earlier in the day reiterated that the bank will prevent one-sided moves on the yuan, adding the focus will remain on keeping the currency stable.
Prior to the market opening, the People's Bank of China set the midpoint rate CNY=PBOC, around which the yuan is allowed to trade in a 2% band, at 7.1942 per dollar, its weakest since Nov.15 though 560 pips firmer than a Reuters' estimate.
The central bank has been setting a stronger-than-expected midpoint fixing recently, at around 7.19, with traders and analysts interpreting it as an official attempt to anchor market expectations and prevent sharp falls in the yuan.
"Despite heightened uncertainty from possible Trump tariffs, the RMB is still firmly anchored by policy," Chang Wei Liang, DBS FX and credit strategist, said in a note.
Liang expects China to maintain yuan stability in view of an already undervalued currency, and the need to limit financial risks.
The Chinese currency has take a beating since Donald Trump's sweeping election win two weeks ago, which has driven the dollar to a 13-month high on expectations of inflationary policies under the new U.S. administration. The President-elect's threat of imposing sharply higher tariffs on Chinese goods has also emboldened yuan bears.
Moreover, Chinese firms are holding on to their dollar earnings from exports and keeping them offshore, pressuring the yuan.
The spot yuan CNY=CFXS opened at 7.2431 per dollar and was last trading 56 pips lower than the previous late session close and 0.74% weaker than the midpoint.
The yuan slid to a 3-1/2 month low in morning trade to 7.2487.
By 0409 GMT, the yuan CNY=CFXS was 0.06% lower at 7.2462 to the dollar.
Analysts' average forecast is for the yuan to fall to 7.3 per dollar by the end of next year from around 7.24 per dollar currently.
The offshore yuan traded at 7.2528 yuan per dollar CNH=, up about 0.03% in Asian trade.
LEVELS AT 04:08 GMT
INSTRUMENT | CURRENT vs USD | UP/DOWN(-) VS. PREVIOUS CLOSE % | % CHANGE YR-TO-DATE | DAY'S HIGH | DAY'S LOW |
Spot yuan <CNY=CFXS | 7.2462 | -0.11 | -1.99 | 7.243 | 7.2487 |
Offshore yuan spot CNH=D3 | 7.2527 | 0.03 | -1.76 | 7.2505 | 7.2572 |
Reporting by Summer Zhen
Editing Shri Navaratnam
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