China's yuan weakened on Monday as the dollar strengthened globally, while an official index showed that it hit a record low against a basket of trade-weighted currencies last week. "The yuan weakened inverse to the dollar's global performance, while the central bank stayed on the sidelines," said a trader at a European bank in Shanghai. "As the yuan's performance is largely stable of late, the central bank has greatly reduced its intervention in trading."
The People's Bank of China (PBOC) set the midpoint rate at 6.6652 per dollar prior to the market open, weaker than the previous fix of 6.6211. In the spot market, the yuan opened at 6.6630 per dollar and was changing hands at 6.6653 at midday, 107 pips away from the previous late session close and in line with the midpoint. It has slid 2.5 percent against the dollar so far this year, and 6.8 percent against a basket of currencies.
The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 94.73, firmer than the previous day's 94.68. The global dollar index rose to 94.905 from the previous close of 94.511. The offshore yuan was trading -0.13 percent away from the onshore spot at 6.6738 per dollar.
The latest China Foreign Exchange Trade System (CFETS) data showed that the index for the yuan's value based on the market's trade-weighted basket stood at a new low of 94.11 on Friday, toppling the previous mark of 94.25 on July 8. Traders said the move reflected that the market still expected the yuan to depreciate in the medium term. "Corporate dollar demand has remained strong despite a general yuan rebound since mid-July," said a trader at a Chinese commercial bank in Shanghai.