PBOC cut yuan’s fixing by 212 pips, onshore and offshore yuan hit weakest level in two years
PBOC cut yuan’s fixing by 212 pips, onshore and offshore yuan hit weakest level in two years

PBOC cut yuan’s fixing by 212 pips, onshore and offshore yuan hit weakest level in two years

 

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The People’s Bank of China (PBOC) cut the yuan’s fixing by 212 pips to 6.8698 per US dollar on Monday, compared to a fixing of 6.8486 in the previous trading day.

The onshore Chinese yuan tumbles more than 400 pips agains the US dollar on Monday morning to break through 6.9 per US dollar mark, trading at 6.9090 per dollar as of 9:36 am local time, the weakest level in two years. The offshore yuan extends losses to about 350 pips to break through 6.93 per US dollar mark for the first time since 2020.

The US Dollar Index, which measure the value of the dollar against a basket of six major currencies, extends gains to 0.43% to hit 109.3245, marking a new high since 2002.

Jay Powell said on Friday that the Federal Reserve “must keep at it until the job is done” as he used a speech at Jackson Hole to deliver his most hawkish message to date on the US central bank’s determination to tame surging inflation by hiking interest rates. Successfully reducing inflation would probably result in lower economic growth for “a sustained period” and interest rates would need to stay at a level that restrains growth “for some time”, he warned.

Powell predicted there would “very likely be some softening of labour market conditions” and “some pain” for households and businesses. “A failure to restore price stability would mean far greater pain,” he added.

Yields on short-dated US government debt climbed. On the two-year Treasury note, the yield increased 0.01 percentage points to 3.38%. The yield on the 10-year note — which moves with growth and inflation expectations — was flat at 3.03%. Yields rise when a bond’s price falls.

Separately, the PBOC injects 2 billion yuan liquidity to the banking system via 7-day reverse repo on Monday, while 2 billion yuan of reverse repo expires, leaving a net zero injection.

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