Chinese Yuan Weakens Against US Dollar, More Downside Expected?
The Chinese yuan has dipped against the US dollar on Tuesday, falling to the lowest levels seen in over a week, as investors hold steady and hesitate to enter new positions in the greenback ahead of the upcoming Fed meeting that starts later today. At the time of writing, USD/CNH is trading at around 6.402.
In addition, volatility in the currency pair has dipped on account of a holiday weekend with fewer traders and market moving news coming out to drive price action. Markets are now closely watching the Fed’s statement due on Wednesday at the end of the two-day meeting for hints on when it could consider starting conversations about tapering its asset purchases.
Meanwhile, China’s central bank – PBOC, is holding its policy steady, keeping the one-year rate at the same rate for the 14th consecutive month. In addition, the PBOC has rolled over 200 billion yuan in maturing one-year MLF loans earlier in the day.
The Chinese central bank also set the official midpoint rate of the yuan at 6.4050 per dollar, 65 pips below Friday’s close and at the weakest level seen since June 4. After rising steadily against the dollar through the past month, June has brought in weakness into the CNH and is expected to face more pressure in H2 2021 amid tensions between China and the US and Europe.
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