SHANGHAI: China’s yuan weakened against the dollar on Monday and was on track for its eighth straight monthly decline in October, the longest such losing streak since 1994 when Beijing unified its market and official foreign exchange rates.

Persistent yuan weakness reflects a stronger dollar, which has been propped up by rapid Federal Reserve tightening, widening interest rate differentials between the world’s two largest economies and a domestic economic slowdown.

“Weakening external demand, zero-COVID and the property fallout will exert much downward pressure on RMB in coming months,” said Ting Lu, chief China economist at Nomura.

“However, markets also need to heed Beijing’s intervention due to its still deep pockets.” State-owned banks have been seen several times selling dollars to prop up the local currency over recent weeks, sources told Reuters.

On Monday, data showed factory activity unexpectedly fell in October, weighed by softening global demand and strict domestic COVID-19 curbs, which hit production, travel and shipping in the world’s second-largest economy. “Yuan sentiment is dampened by news of lockdowns as well as weaker PMI prints for Oct,” analysts at Maybank said in a note.

Prior to market opening, the People’s Bank of China (PBOC) set the midpoint rate at 7.1768 per dollar, 70 pips weaker than the previous fix 7.1698, and the weakest since Feb. 14, 2008.

In the spot market, the onshore yuan opened at 7.2560 per dollar and was changing hands at 7.2630 at midday, 130 pips softer than the previous late session close.

If the yuan retains all the losses by late night close, it would have fallen about 2% against the dollar for the month, posting the eighth straight losing month.