SHANGHAI, June 24: The yuan edged lower versus the dollar on Monday, extending a recent mild downtrend amid slowing capital inflows into China, traders said.
Dollar sales that had helped push up the Chinese currency in April and May are ebbing, which may herald a slight yuan weakening in coming weeks, traders said.
Spot yuan was trading at 6.1374 versus the dollar at midday, down 0.05 percent from Friday’s close after the People’s Bank of China (PBOC) fixed a weaker official midpoint of 6.1807, compared with Thursday’s 6.1766.
The PBOC has guided the yuan to fall slowly but steadily by a total of 0.27 percent since the currency hit a record high of 6.1210 on May 27 and again on June 3.
Still, there is little indication that the yuan is facing the same downward pressure as other emerging Asian currencies.
The Malaysian ringgit, Singapore dollar, Philippine peso and Korean won have all fallen steeply since mid-May, when the market began to anticipate that the Federal Reserve may soon begin to taper its bond buying program.
A rally in the dollar index in recent days has given the Chinese central bank an easy excuse to let the yuan weaken slightly, but the yuan’s movements since the start of the second quarter of this year has largely independent of global dollar performance, traders said.
‘Signs of less capital inflows, plus the PBOC’s guidance, have reversed a yuan appreciation trend,’ said a trader at a Chinese commercial bank in Shanghai.
‘With no major market-moving news related to the yuan around the corner, the ease of dollar sales in the market points in the direction a slight yuan weakening in coming weeks,’ he said.
The weaker guidance came after the central bank guided the yuan stronger from early April to late May, ahead of a slew of major political events, including a G20 meeting and Chinese President Xi Jinping’s visit to the United States. (agencies)
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