The Chinese yuan fell on Friday to over a
4-year low against the US dollar amid
increasingly lower rate set by the central bank, the country's economic
slowdown and the strong capital outflow.
The pair USD/CNY is trading at 6.4553 and this is the lowest level from August 2011 onwards.
The pair USD/CNY is trading at 6.4553 and this is the lowest level from August 2011 onwards.
Earlier Friday, the People's Bank of China (PBOC) had set the mid-point for the
yuan at a new four and a half year low of 6.4358, down 0.2 percent from
Thursday's fixing.
China's central bank lets the yuan spot rate rise or fall a maximum of 2 percent against the dollar relative to the official fixing rate.
Nomura's Craig Chan said the moves are in line with policymakers' repeatedly stated ultimate goal of a more market-determined exchange rate.
"There really isn't much perceived intervention in the markets," he said at a press conference Friday. Chan believes that the reason the yuan is being allowed to decline now, when the market mechanism shift was officially made in August was due to concerns over whether some debtors would struggle with external debt if the currency declined.
In the intervening months, PBOC data has indicated substantial hedging activity and concern over external debt has subsided somewhat, he said.
Even with the declines, "our view is the currency is still over valued.They want to move closer to fair value, which we perceive to be around6.80," for the dollar-yuan pair, Chan said. Nomura expects the currency pair will hit that level by the end of 2016.
China's central bank lets the yuan spot rate rise or fall a maximum of 2 percent against the dollar relative to the official fixing rate.
Nomura's Craig Chan said the moves are in line with policymakers' repeatedly stated ultimate goal of a more market-determined exchange rate.
"There really isn't much perceived intervention in the markets," he said at a press conference Friday. Chan believes that the reason the yuan is being allowed to decline now, when the market mechanism shift was officially made in August was due to concerns over whether some debtors would struggle with external debt if the currency declined.
In the intervening months, PBOC data has indicated substantial hedging activity and concern over external debt has subsided somewhat, he said.
Even with the declines, "our view is the currency is still over valued.They want to move closer to fair value, which we perceive to be around6.80," for the dollar-yuan pair, Chan said. Nomura expects the currency pair will hit that level by the end of 2016.
Just to remind that the gross domestic product of China slowed to 6.9 percent in the third quarter
of 2015, not being able to meet the target of 7 percent, fueling fears that the
country's economy will fail to grow at the desired pace after years of
explosive expansion.
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