The yuan closed lower against the dollar on Wednesday after scoring its biggest monthly loss in August since its landmark 2005 revaluation, guided by a weak mid-point and ignoring a rebound in China's manufacturing sector. The yuan's weakness comes as a senior official at the People's Bank of China was quoted saying that China saw little danger of a double dip in the global economy.
The PBOC fixed the mid-point, or its daily reference rate against the dollar, at 6.8126 on Wednesday, down from Tuesday's 6.8105, guiding spot yuan to finish at 6.8115, down from Tuesday's close of 6.8074. The yuan's fall comes after it lost 0.48 percent against the dollar for August, its biggest monthly loss since Beijing revalued the yuan and pledged currency reform in July 2005.
The reform was interrupted for nearly two years since July 2008 until mid-June this year during which China re-pegged the yuan to the dollar to help fight the global financial crisis. The PBOC announced a resumption of the reform with a depegging on June 19 this year. The yuan rose as much as 0.91 percent on August 9 after the depegging, but the central bank has since guided it lower and the yuan is now up only 0.22 percent.
Most investors still believe China will not allow the yuan to fall below 6.8262 against the dollar - the level before the PBOC announced a depegging of the two currencies in June. Offshore, benchmark one-year dollar/yuan non-deliverable forwards (NDFs) rose to their highest in more than two months in intraday trading on Wednesday to imply less yuan appreciation, as sentiment towards a strengthening yuan was hurt by a slew of weak mid-points.
One-year NDFs hit a high of 6.7270 bid on Wednesday morning from 6.7180 at Tuesday's close, with their implied 12-month yuan appreciation falling to 1.27 percent from 1.38 percent. In late trade, however, the NDFs fell back to 6.7050, with their implied yuan appreciation bouncing back to 1.6 percent.
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