HONG KONG: China’s yuan extended its month-long decline on Friday, pressured by a weak domestic economy, low yields and the US dollar’s broad rally.

The offshore yuan dropped in early morning trade to its weakest level since December, after the People’s Bank of China set the midpoint rate at 7.0356 per US dollar prior to the market open.

The fixing, weaker than the previous fix 6.9967, was in line with Reuters’ estimates and was the weakest fix since Dec. 5.

Investors took the weak fixing as a sign that the central bank may not intervene in the foreign exchange market and would tolerate further weakness in the yuan.

The yuan has fallen 1.7% against the US dollar thus far this week.

In onshore deals, the yuan opened at 7.05 per dollar and was changing hands at 7.0429 at midday, 59 pips weaker the previous late session close and 0.1% away from the midpoint.

Offshore yuan weakens past key 7 per dollar as China’s recovery sputters

The spot rate is allowed to trade in a range 2% above or below the official fixing on any given day.