Offshore yuan weakens to 16-month low amid PBoC concerns

The offshore yuan weakened to around 7.35 per dollar, reaching its lowest level in 16 months, despite the central bank’s efforts to strengthen the official midpoint and reassure markets about currency stability.

Offshore yuan weakens to 16-month low amid PBoC concerns

On Friday, the yuan fell below the critical 7.3 per dollar level, which the People's Bank of China (PBoC) has defended since September, suggesting potential for further depreciation amid expectations of more monetary easing and fiscal support. The currency faced pressure from a stronger US dollar, declining Chinese yields, and growing trade tensions. Before the market opening, the PBoC set the midpoint at 7.1876 per dollar, just slightly more potent than the previous fix but remaining firmer than 7.2 since mid-November, reflecting the central bank’s concerns over the yuan's decline.

PBoC plans rate cuts to address overcapacity, deflation

In a recent move, the PBoC also indicated plans to cut short-term interest rates, focusing more on policy guidance rather than credit growth to address risks related to overcapacity and deflation.