(Bloomberg) — The onshore yuan fell to its weakest in four months, breaching a closely-watched technical level after a months-long effort by Chinese authorities to keep the managed currency in a narrow range.
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The yuan weakened as much as 0.3% on Friday, through the 7.20 per dollar level it had mostly held since November. The People’s Bank of China lowered its daily reference rate for the managed currency by the most since early February, a sign to some that Beijing is greenlighting more depreciation amid a bumpy economic recovery.
While the PBOC has been anchoring the currency with the so called fixing since last year, stress has been building of late amid a dollar rebound and weakness in Asian peers such as the yen and Australian dollar. But a sharp depreciation in the yuan also invites pushback from officials, such as state bank selling of the dollar or verbal intervention.
“Seem like this move higher is triggered by the weaker fix,” said Fiona Lim, senior FX strategist at Maybank in Singapore. That sends a sign that the “PBOC is willing to allow some weakness in the yuan as the dollar gains a bit of bullish bias recently.”
Bloomberg’s dollar gauge pushed higher Friday and the Australian and New Zealand currencies weakened. Chinese stocks fell.
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