BEIJING: The offshore yuan inched lower toward 7 per dollar, widening its discount to the onshore rate to the most in more than two weeks, as traders sold the currency on bets it would face stronger depreciation pressures as the year turns.
China’s currency traded in Hong Kong dropped as much as 0.23% to 6.9873 per dollar yesterday. The offshore yuan’s discount to the onshore exchange rate, seen as a gauge of traders’ bearishness on the currency, expanded to as wide as 0.45%, the most since Dec 13 on an intraday basis.
The onshore yuan is headed for its steepest annual plunge in more than two decades, and when the year turns, policy makers will be faced with a triple whammy of the renewal of citizens’ US$50,000 quota of foreign-currency purchases, prospects of further Federal Reserve interest-rate increases, and concern that US President-elect Donald Trump may slap punitive tariffs on China’s exports to the world’s largest economy.”It’s only a matter of time for the yuan to hit 7 per dollar but the PBoC won’t likely let that happen in the very short term, because that would hurt confidence and add even more pressures on the currency,” said Irene Cheung, Singapore-based forex strategist at Australia & New Zealand Banking Group Ltd. – Bloomberg
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