China's currency hits 15-year low after official guidance breaches key level

The renminbi’s weakness reflects recent US dollar strength, along with downbeat Chinese economic data and Covid-19 disruptions. PHOTO: REUTERS

SHANGHAI - China’s renminbi hit a near 15-year low against the US dollar on Tuesday, after the central bank fixed the official guidance rate at its lowest level since the global financial crisis of 2008.

Prior to market opening, the People’s Bank of China set the midpoint rate at 7.2081 per dollar, the lowest since Jan 24, 2008. That was 313 pips or 0.43 per cent weaker than the previous fix of 7.1768.

Currency traders took the official guidance’s breach of the key 7.2 per dollar level to mean that the authorities would allow further renminbi weakness.

The onshore renminbi opened at 7.3201 per dollar and quickly touched 7.3280, the lowest level since Dec 26, 2007. It last traded at 7.3075 as at 0246 GMT, 25 pips weaker than the previous late session close.

The renminbi’s weakness reflected recent US dollar strength, along with downbeat Chinese economic data and Covid-19 disruptions, analysts at OCBC Bank said in a note.

The Federal Reserve’s aggressive monetary tightening has supported the greenback in recent months, and investors were eyeing a monetary policy meeting this week for fresh clues on the future pace of rate hikes.

“Tightening Covid prevention and temporary lockdown measures could raise more concerns over China’s economic growth,” the analysts added, noting the next supportive level for the renminbi could be 7.4 per dollar.

China’s Covid-19 curbs forced the temporary closure of Disney’s Shanghai resort on Monday, while production of Apple iPhones at a major contract manufacturing facility could drop by 30 per cent in November due to coronavirus restrictions, a source told Reuters. REUTERS

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