Offshore yuan falls despite PBoC fix, Shanghai recovers

By FXStreet FXStreet (Mumbai) – China’s central bank (PBoC) today set the mid-point rate for the yuan at 6.5616 per dollar, firmer than the previous fix of 6.563 yesterday’s closing quote 6.5743. The PBoC probably wanted to send out a signal that it does not intend to devalue the currency further as expected broadly by the markets. Beginning August, the yuan has shed 5 per cent of its value against the dollar on account of continuous depreciation.

The Chinese central bank last week guided the yuan lower twice primarily to help exporters. The first trading days of 2016 saw the PBOC depreciate the yuan to its weakest in almost five years in the onshore markets. The fall of value of yuan in onshore market prompted traders to weaken the currency in the off shore market as well.

Offshore yuan weakened today even though the PBoc fixed the exchange rate higher. A dealer at a foreign bank in Shanghai told Reuters “The onshore yuan weakened in early trade, taking cues from the offshore yuan. The offshore was down probably because liquidity improved”. China’s yuan dropped in the offshore trade and with today’s decline the yuan erased the gains earned earlier in the week …read more

Source:: FX Street