The People’s Bank of China just set the midpoint for the USD/CNY at the weakest level in over four years, continuing the trend in the currency seen since the IMF announced it will be admitted to its special drawing rights basket (SDR) earlier in the month.
On Monday the bank set the mid-point for the USD/CNY cross at 6.4495, up from Friday’s fixing level of 6.4358. It was the weakest fixing level from the PBOC since July 2011. Since the start of December – when the IMF announcement was made – the currency has now weakened by close to 1%.
The USD/CNY only trades between 9.30am to 4.30pm Beijing local time, unlike other currencies trading around the clock.
In initial trades on Monday the USD/CNY leapt higher, indicating further weakening in the renminbi. Currently it trades at 6.4602, also the weakest level seen since July 2011. It briefly touched a high of 6.4650, taking losses against the US dollar in December to 1.05%.
On Friday the PBoC signalled its intention to change the way it will manage the value of the CNY by potentially loosening the peg to the USD and starting to track CNY against a trade-weighted basket of currencies according to a statement released on the bank’s website.
“Market participants were quick to conclude that the central bank was shifting to a new FX regime and more flexibility (and CNY weakness) is warranted,” said Richard Grace, chief currency strategist at the the CBA in a note released earlier today.
It appears that sentiment is continuing to be expressed in Asian trade today.