The offshore yuan weakened toward its lowest on record against the dollar, as a cut to the daily reference rate for the managed currency stoked bets China is comfortable with a gradual depreciation.
China’s currency declined to about 7.36 per dollar in overseas trading, beyond the psychologically important level of 7.35 and close to the weakest since the creation of the offshore yuan market in 2010. The move came after the People’s Bank of China set its so-called fixing at a two-month low on Friday.
The PBOC is faced with a daunting task of maintaining the so-called impossible trinity, where it needs to stabilize the exchange rate and prevent capital outflows while keeping an independent monetary policy. But China’s sluggish economy and dovish policy is heaping pressure on the yuan, especially as resilient US data and a high interest-rate differential there has traders favoring the dollar.
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