China’s onshore yuan softened against the dollar on Monday to its weakest level since April 2011 after the central bank set the guidance rate at a more than 4-1/2-year low.
The offshore yuan weakened to its lowest level since September 2011.
Sentiment was further affected by Monday’s Caixin/Markit China Manufacturing Purchasing Managers’ Index, which showed factory activity contracted for the 10th straight month in December, and at a sharper pace than in November.
This weighed on hopes that the economy would start 2016 on a steadier footing.
“The market was trading narrowly around 6.51 yuan,’’ said an onshore trader at a foreign bank in Shanghai in early trade.
“Dollar demand was strong, probably because some clients were in great need of dollars for travelling as they are still on holiday.’’
The central bank has extended currency market trade to 11:30 p.m. local time (1530 GMT) as of Monday, rather than ending at 4:30 p.m., but the move will have no immediate impact on the yuan’s value, traders said.
Still, the yuan’s closing rates will be the level at which it is quoted at 4:30 p.m. local time, at around 6.5190 on Monday.
The spot market was changing hands at 6.5272 per dollar, 0.51 per cent weaker than the previous close. It moved narrowly around 6.50 by midday and weakened nearly 200 pips to 6.5275 at 4:40 p.m. local time from an hour earlier.
Prior to the market open, the People’s Bank of China set the yuan midpoint rate at 6.5032 per dollar — its lowest level since May 2011, 0.15 per cent weaker than the previous fix of 6.4936.
The offshore yuan was trading 1.42 per cent weaker than onshore spot at 6.6213 per dollar, edging near a five-year low touched last week.
The onshore yuan was trading against the euro at 7.1369, 0.6 per cent weaker than the previous close. It eased 1.6 per cent against the Japanese yen at 5.4806 to 100 yen.
Against the dollar, it finished 2015 with a record yearly loss of 4.7 per cent after volatile trade over the last five months.
The market widely expects the Chinese currency to continue depreciating this year, and is likely to hit 6.8 per dollar by the end of 2016, a fall of 4.7 per cent.