Yuan closes at over 21-mth low on hawkish Fed and U.S. currency report
(Updates domestic closing price, adds details)
SHANGHAI, Oct 18 (Reuters) - China's yuan closed at itsweakest in more than 21 months against a broadly stronger dollaron Thursday, as the U.S. Federal Reserve's hawkish stance oninterest rates and the U.S. Treasury's failure to label China asa currency manipulator gave traders confidence to drive the yuanlower.
The onshore spot yuan ended the day at 6.9409 perdollar, 174 pips or 0.25 percent weaker than the previous latenight session close, and its weakest since Jan.4, 2017.
The yuan had opened at 6.9340 per dollar, and struck anintra-day low of 6.9425 before the close.
Minutes of the Federal Reserve's last policy meeting showedbroad agreement among members over the need to raise U.S.borrowing costs further, pointing to a growing divergencebetween monetary policy stances in China and the United States. As widely expected, the Treasury Department did not nameChina a currency manipulator in its semi-annual report. But itexpressed concern about the yuan's depreciation. Gao Qi, FX strategist at Scotiabank, indicated he expectsthe yuan to keep weakening, saying it would "likely continuetrading with a 6.95 resistance" following the Treasury decision.
Prior to the open, the People's Bank of China (PBOC) setThursday's midpoint rate at 6.9275 per dollar, 172pips or 0.25 percent weaker than the previous fix of 6.9103, andthe weakest since Jan. 5, 2017.
Traders said they did not see support for the yuan frommajor state-owned banks, but they expect some kind of action ifthe yuan approaches 7 per dollar.
Still, some analysts expect the central bank to find a wayease monetary policy to support an economy, that is expected topost its slowest growth since the global financial crisis whenthird quarter data is released on Friday.
"With the international environment being complicated andvolatile, downward pressure on China's economy has increased,but we are determined, and we are able, to cope with risks andchallenges," state radio reported Premier Li Keqiang saying in aspeech on Tuesday in the Netherlands. Separately, net foreign exchange sales by the central bankin September rose to the highest in 20 months, as capitaloutflow pressure grew. The PBOC sold a net 119.4 billion yuan($17.21 billion) worth of foreign exchange last month, up from2.39 billion yuan in August, according to Reuters calculationsbased on central bank data released on Thursday. ($1 = 6.9372 Chinese yuan)
(Reporting by Winni Zhou and John Ruwitch; Editing by SimonCameron-Moore)
Messaging: winni.zhou.thomsonreuters.com@reuters.net)) Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.  |