CNY: Renminbi continues to trend gradually lower vs. USD – MUFG

By FXStreet FXStreet (Delhi) – Lee Hardman, Currency Analyst at MUFG, suggests that the main focus overnight has been the sharp sell-off in the Chinese equity market which has resulted in broad-based Asian equity and currency market weakness.

Key Quotes

“Trading in Chinese equites was been halted after the CSI300 index dropped by 7%. Under the new circuit breaker rules which were finalized last month, a 7% intra-day decline closes the market for the rest of the day. It is the largest daily decline in the Chinese equity market since the sell-off in Q3 bringing an abrupt end to the period of relative stability over the last couple of months.

The renminbi has also continued to weaken overnight extending the gradual weakening trend which has been in place over the last couple of months. The onshore USD/CNY rate has moved above the 6.5000-level for the first time since May 2011. The spread between the onshore and offshore rates has also continued to widen moving to within touching distance of the highs from early in September.

The developments have heightened both investor concerns over outlook for the Chinese economy and renminbi devaluation expectations which are undermining investor risk sentiment more broadly. The yen has …read more

Source:: FX Street