SHANGHAI, June 26: The yuan slipped versus the dollar on Wednesday, continuing a recent mild downtrend as the central bank set a weaker official midpoint, signalling it does not intend the Chinese currency to appreciate further after a rally in April and May, traders said.
Worries over the health of China’s financial system and the macro-economy, sparked by an acute liquidity squeeze in China’s money markets, have also sapped confidence in sustained yuan appreciation recently, traders said.
Spot yuan was trading at 6.1476 versus the dollar at midday, down 0.04 percent from Tuesday’s close of 6.1453 after the People’s Bank of China (PBOC) fixed its official midpoint at 6.1779, slightly weaker than Tuesday’s 6.1767.
Tight liquidity in China’s money markets since early June and a plunge in China’s stock market this week have sparked worries over the health of the world’s second-largest economy.
‘With all eyes turning to the money markets, the currency market appears to be left in the cold,’ said a trader at a European bank in Shanghai.
‘The central bank has also kept on the sidelines (in the forex market), leaving the yuan to fall slightly in a reverse of its stance of encouraging yuan appreciation in April and May.’
The PBOC 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. But the yuan has fallen 0.43 percent since June 3 when it matched a record high of 6.1210, first hit on May 27. (agencies)
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