China's yuan falls to near 8-year low as dollar advances.
China's yuan fell to its lowest level in nearly eight years and on Tuesday as the dollar climbed on expectations of higher interest rates under President-elect Donald Trump.
The yuan broke through 6.86 per dollar in morning trade, its weakest since December 2008 and taking its losses so far this year to more than 5 percent.
Traders say the People's Bank of China (PBOC) has been taking a hands off approach in the past few days, using the opportunity to release depreciation pressure on the yuan as the dollar rises.
But they do not think Beijing will allow the yuan to fall too sharply in the near-term and risk a political row before Trump is even sworn into office. On the campaign trail, Trump repeatedly accused China of devaluing the yuan to make its exports more competitive and threatened punitive tariffs on Chinese goods.
"We haven't seen central bank intervention for quite some time and that's also why the yuan fell so much recently and broke through key levels easily," said a trader at a big Chinese bank in Beijing.
The PBOC also did not try to press down dollar/yuan midpoint and let the market decide it, which showed it was still comfortable with market movements, the trader said.
The People's Bank of China set the midpoint rate CNY=PBOC at 6.8495 per dollar prior to the market open, weaker than the previous fix 6.8291.
In the spot market, the yuan CNY=CFXS opened at 6.8453 per dollar and was changing hands at 6.8596 at midday, 144 pips away from the previous late session close and 0.15 percent away from the midpoint.
The Thomson Reuters/HKEX Global CNH index .RXYH, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 95.08, weaker than the previous day's