China’s yuan softened against the dollar on Wednesday after the central bank continued to fix its midpoint weaker ahead of an anticipated rise in US interest rates this week.
Offshore yuan firmed slightly against the dollar, after sources told Reuters that China’s central bank was ready to moderate sharp falls in the currency in the offshore market.
The People’s Bank of China set the midpoint rate at 6.4626 per dollar prior to market open, 0.1 per cent weaker than the previous fix of 6.4559, the eighth straight day the fixing has been softer.
The spot market opened at 6.4650 per dollar and was changing hands at 6.4642 at midday, 0.05 per cent weaker than the previous close.
“(Market players) became a little bit more cautious since yesterday after the yuan reached a fresh low level around 6.46,’’ said a trader at a Chinese commercial bank in Shanghai.
“People are also eyeing the likely US rate hike that will come out later.’’
The onshore yuan hit 6.45 per dollar on Friday, the level of the currency’s surprise devaluation on August 11, and has edged down to 6.46 this week.
Top officials at the United State Federal Reserve on Tuesday began a two-day policy meeting that is expected to end with the first US interest rate increase since 2006, and is due to issue the decision on Wednesday at 2 p.m. EST (1900 GMT).
The rate hike is likely to strengthen the dollar and exert downward pressure on the yuan.
The offshore yuan was trading at 6.525 per dollar, 0.25 per cent firmer than the end of the previous trading day, and at a 0.93 per cent discount from the onshore spot.
China’s central bank is on guard against a sudden attack on the yuan in offshore markets, and is ready to intervene if the gap between offshore and onshore exchange rates becomes destabilising, sources involved in policy discussions say.
On Wednesday, onshore yuan was trading against the euro at 7.0729, 0.8 per cent firmer than the previous close, and 0.7 per cent firmer against the yen at 5.3111.