PBOC guides the yuan lower, driving further depreciation

The headquarters of the People's Bank of China in Beijing.
The headquarters of the People's Bank of China in Beijing. PHOTO: REUTERS

SHANGHAI (REUTERS) - The People's Bank of China set its official midpoint rate at 6.4236 per US dollar prior to the market open on Thursday (Dec 10), 0.1 per cent weaker than the previous fix of 6.4140.

Guided by the PBOC's official guidance rate, the yuan has hit three-month lows each day this week in intraday trading.

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

Last week, the International Monetary Fund announced that it would include the yuan in its Special Drawing Rights (SDR) basket alongside the dollar, euro, pound sterling and yen, an important milestone in China's integration into global finances.

Markets have been rife with speculation that Beijing would allow the yuan to depreciate after the SDR inclusion.

The yuan's performance this week appears to justify that speculation, traders said.