On Friday, the Chinese currency is trading at over a 4-year low against the dollar amid increasingly lower reference rate set by the central bank, the country’s economic slowdown and the strong outflow of capital, says CNBC.
The pair USD / CNY trading at 6.4553 from *, thus the yuan is the cheapest from August 2011 onwards Earlier Friday’s Bank of China set the reference rate of the currency to 6.4358, which is new 4.5-year low. Exchange rate of the yuan depreciate Friday and by 0.3% compared to the reference level Thursday.
Central bank sets the reference rate every day and let the currency float in a corridor of 2% around him.
The move of the authorities is in line with their objective the exchange rate is determined more by the market, says Craig Chan from Nomura.
“There is a significant intervention in the markets,” he said at a press conference on Friday, quoted by CNBC. According to Chan reason why the yuan is allowed to depreciate until now, although the mechanism for determining the course of the market entered into force in August, is rooted in fears that the debtors would not be able to repay their external debt if the currency depreciate.
During the months of intervention, the Bank of China have shown significant activity of hedge and concerns about external debt declined, he said. Despite the decline “our view is that the currency is still overvalued. It is the desire to move closer to fair value, which we believe is around 6.80 to the dollar-yuan pair, “said Chan. Experts of Nomura provide this level to be reached by the end of 2016
Problems with growth of Celestial Empire and the export of capital raised expectations that the currency will continue to become cheaper.
Gross domestic product (GDP) of China slowed to 6.9 percent in the third quarter, not being able to meet the target of 7 percent, fueling fears that the country’s economy will fail to grow at the desired pace after years of explosive expansion.