HONG KONG: China’s yuan hovered near a five-month low against the dollar and traded a whisker away from its daily downside limit on Friday, weighing down by rising US treasury yields and the yen’s stubborn weakness.
The yuan is down 2.1% against the dollar so far this year, pressured by its relative low yields versus other currencies and by outflows of foreign investment from an anaemic stock market.
It hit a five-month low of 7.2478 on Thursday even though the central bank’s daily benchmark fixings and support from state-owned banks have slowed its decline.
Prior to the market opening, the People’s Bank of China set the midpoint rate, around which the yuan is allowed to trade in a 2% band, at 7.1056 per US dollar, firmer than the previous fix of 7.1058 and remaining consistently higher than market expectations in a show of support.
Spot yuan opened at 7.2409 per dollar and was changing hands at 7.2464 at midday, 0.09% softer than the previous late session close and 1.98% away from the midpoint.
The yuan is facing mounting challenges as sticky inflation in the US dashes hopes of rate cut and buoys the dollar, while a persistently weak Japanese yen is dragging down its Asian peers.
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