China's yuan languishes in longest losing streak on record

Despite efforts by China's central bank, the People's Bank of China (left), to stabilise the yuan via daily fixing, the currency is on track for 11 straight sessions of losses against the US dollar. PHOTO: REUTERS
Despite efforts by China's central bank, the People's Bank of China (above), to stabilise the yuan via daily fixing, the currency is on track for 11 straight sessions of losses against the US dollar. PHOTO: REUTERS

SHANGHAI • The yuan cannot stop sliding, despite efforts by China's central bank to stabilise the currency via daily fixing.

The currency is on track for 11 straight sessions of losses against the US dollar, which would be its most prolonged slump, according to China Foreign Exchange Trade System data that goes back to 2007.

The currency briefly fluctuated yesterday after the central bank set its daily reference rate at a stronger-than-expected level for a seventh straight day - a sign that the People's Bank of China (PBOC) is growing uncomfortable with the yuan's descent.

The onshore yuan has traded more than 1 per cent weaker than its daily fixing for the fourth day, signalling that the impact of the PBOC's efforts to support the currency is diminishing.

Bearish sentiment is prevailing in the wake of China and the United States exchanging escalated tariff threats.

Yesterday, the currency slipped as much as 0.09 per cent to 7.1711 per dollar in Shanghai.

"The steady onshore yuan fixings reflect a stronger PBOC policy signal to stabilise the yuan," said Mr Ken Cheung, chief Asian foreign-exchange strategist at Mizuho Bank.

"However, it appears they're not strong enough, given the prevailing yuan sentiment and deadlocked China-US trade talks."

An escalation in the trade war between China and the US has helped make the yuan the worst-performing currency in Asia since May.

It has plummeted by almost 4 per cent this month - set for its biggest monthly drop since January 1994, when the modern exchange rate regime was adopted.

A slowdown in China's economy has also dented investor confidence.

Given that trade war risks are not abating, the PBOC may have to consider using verbal or currency intervention to clarify its tolerance level for weakness in the yuan, Mr Cheung said.

The onshore yuan traded 0.05 per cent lower at 7.1678 per greenback as of 2.48pm Shanghai time.

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A version of this article appeared in the print edition of The Straits Times on August 30, 2019, with the headline 'China's yuan languishes in longest losing streak on record'. Print Edition | Subscribe