The Chinese yuan to US dollar exchange rate onshore expanded its decline on Wednesday (29th), closing at 7.2487 yuan to 1 US dollar, down 17 points, hitting a near 6-and-a-half month low. The midpoint price also hit a low of over 4 months.
On May 29, the onshore yuan closed at 7.2487, down 17 points from the closing price at 4:30 pm on the previous trading day, marking two consecutive declines. It broke below the low of 7.2472 set on April 25 and hit a new low for nearly 6-and-a-half months since November 16 last year.
On the 29th in the morning, the People’s Bank of China adjusted the midpoint rate of the yuan against the US dollar to 7.1106, down 5 points from the previous trading day, marking a 4-month low since January 23 (7.1117).
The offshore price also dropped to 7.267, hovering around, reaching a new low since April 29.
Reuters cited informed sources reporting that in recent trading days, Chinese state-owned major banks have been operating in the offshore market, buying US dollars and then selling them in the spot market to stabilize the yuan exchange rate.
In addition, traders indicated that the official midpoint of the yuan by China continues to anchor the lower limit of the daily trading range, limiting the downside potential in short-term exchange rates. A trader from a foreign bank mentioned that the 7.25 level is a temporary resistance as breaking through it means “the downside is very close.”
According to Nikkei Asia, the high interest rates in the US and measures to stimulate the domestic economy pose a continuous challenge to the yuan. Gary Ng, a senior economist at the French Foreign Trade Bank, stated: “Unless the US actually shows a more moderate stance, the depreciation pressure on the yuan may continue for a while.”