China’s yuan fell to its weakest level against the dollar since Nov 2010 on Wednesday, extending its slide to a fifth straight session after China’s central bank sharply weakened its official guidance rate following the recent surge in the dollar. Traders reported that state-owned banks were offering dollars to calm the markets which have been put on edge by the yuan’s fast depreciation.
According to one trader at a Chinese commercial bank in Shanghai, “This is a sign from the central bank, warning the market that there’s no need to panic, don’t do anything rash.”
Brexit Worries
The dollar index rose over 0.5 percent against a basket of major currencies on Tuesday while the sterling reached a fresh 31-year trench early Wednesday on concerns of economic and financial outcome from Brexit, and Beijing allowed the yuan to fall to the lowest since late 2010 which traders fear could signal an even steeper decline.
Ben Kwong, chief operating officer of KGI Asia said, “Worries over Brexit have heightened and the sterling fell sharply. The weakening sterling is adding to depreciation pressure of the yuan, which has dragged Chinese shares both in Shanghai and Hong Kong.”
The mainland’s blue-chip CSI300 index fell 0.3 percent to 3,199.16 points by the lunch break and the Shanghai Composite Index slid 0.2 percent to 3,001.07. Hong Kong’s blue chip Hang Seng Index was down 1.9 percent to 20,359.35 and the China enterprises index dropped 2.1 percent. Both indices appeared on track for their biggest one-day percentage decline since June 24.
