SHANGHAI/SINGAPORE: China’s yuan eased to its weakest in six months against the dollar on Thursday, as the greenback made broad gains across global currency markets based on speculation that US interest rates could rise further, even if the Federal Reserve pauses next week.

Concerns that China’s post-pandemic economic recovery is losing momentum have also put pressure on the yuan, analysts said.

“China’s growth recovery has been weaker than expected so far.This may be dragging short term portfolio inflows,” Wang Tao, chief China economist at UBS, said.

Prior to market opening, the People’s Bank of China (PBOC) set the midpoint rate at a fresh six-month low of 7.1280 per dollar, 84 pips weaker than the previous fix of 7.1196.

In the spot market, the onshore yuan opened at 7.1350 per dollar and weakened to a low of 7.1425 at one point, the weakest level since Nov. 30, 2022. By midday, it was changing hands at 7.1392, 52 pips softer than the previous late session close.

Its offshore counterpart followed the suit and weakened to a new six-month low of 7.1552 per dollar before trading at 7.1514 around midday.

“Higher Treasury yields certainly pressured the yuan,” said a trader at a foreign bank, noting market participants would be wary of any official measures to stem yuan weakness.

China’s yuan flirts with fresh 5-month low after hawkish Fed official comments

Central bank deputy governor Pan Gongsheng told delegates at the Lujiazui Forum on Thursday that China has confidence, conditions and capacity to maintain stable operations of the foreign exchange market.

Earlier this week, sources told Reuters that A Chinese self-regulatory body overseen by the central bank has asked major state-owned banks to lower the dollar deposit interest rates, in the latest move to shore up the weakening yuan currency.

Wang, the UBS economist, said she now expected the yuan to trade between 6.9-7.0 per dollar at year-end, weaker than her earlier projection of 6.8 per dollar.