Yuan (CNY) Hits Record 11-Year Slump Vs. USD On Financial Meltdown Fears
The Chinese currency registered a new 11-year decline versus the US greenback late Thursday due to concerns about a financial crash, prompting state-regulated banks to give the yuan a new shot in the arm as the economy treads along.
Based on charts by China Forex Trade System, the yuan's (renminbi) central parity rate dropped 81 pips to 7.0571 against the USD. In its spot currency exchange market, the yuan (CNY) is allowed to go up or down by at least 2 percent from its central parity during each session.
The Chinese currency's decline, along with losses in other Asian trading floors on worries about a looming global economic slump, dragged the antipodean American currency down while lifting the Japanese currency against key cross-lines in the risk-off exchange.
Also, Beijing's trade issues with Washington weighed heavily on the yuan, which retreated to the politically sensitive threshold of 7-to-1 USD, late Monday. The yuan's central parity rate against the USD is taken from a weighted price average offered by currency players before the opening bell of interbank floors each trading day.
Other major currencies were stuck in narrow ranges prior to US central bank chairman Jerome Powell's message at Jackson Hole on Friday, which is heavily anticipated by Wall Street following a reversal in the Treasury output that underscored the risk of a financial collapse.
The renminbi, popularly referred to as "people's money," has shed 4 percent since notching a high of 6.6863 to the USD in February. Onshore, the currency was down 7.0751 per USD, its most feeble since March 2008, before it eased moderately to 7.0733, while offshore, the greenback rallied 0.30 percent to 7.0873 yuan.
A weaker Chinese currency could hinder the country's efforts to boost its sluggish financial market by attracting an outflow of investments - and possibly hike borrowing rates -- from the globe's second-biggest economy.
Major government regulated banks threw their support for the renminbi by receiving USD/CNY swaps, investors disclosed. On Wednesday, the International Monetary Fund cautioned the governments against deliberately bringing the yuan down through market intervention.
Against the Swiss currency, the USD traded at 0.9827 and neared a 2-week peak of 0.9832. The Australian dollar (AUD) weakened to 0.31 percent to $0.6761 and moved down 0.46 percent to 71.94 yen, while the New Zealand dollar (NZD) slipped to $0.6371, its weakest since February 2016, and dropped 0.67 percent to 67.85 CNY.