NEW YORK CITY: China’s yuan eased slightly against the dollar on Tuesday (Wednesday in Manila), a day after its biggest surge in more than a decade on the Chinese central bank’s move to underpin the currency.
Against the greenback, the yuan, also known as the renminbi, was trading at 6.5169 per dollar about 10 p.m. local time, up from 6.4962 on Monday.
On Monday, the unit surged more than 1 percent against the dollar after the head of the People’s Bank of China, Zhou Xiaochuan, said there was no reason the currency should fall further after a six month slide.
The Chinese economy grew 6.9 percent in 2015 — the slowest rate since 1990 — and capital has been flowing out of the country due to worries over flagging growth and a sharper fall in the currency.
In an interview with Caixin magazine published over the weekend, PBoC head Zhou blamed foreign speculators for volatility in the yuan and said there was “no foundation for continued depreciation.”
Analysts expect further PBoC monetary loosening after six interest rate cuts in the 12 months to November and several cuts in the amount of funds banks keep in reserve.
“Looking ahead, we expect credit growth to remain strong given that the PBoC has kept monetary conditions loose,” Julian Evans-Pritchard, China economist at Capital Economics, said in a research note.
Forex traders awaited publication Wednesday of the Federal Reserve’s minutes of the Federal Market Open Committee policy meeting in January.
In December the US central bank projected four quarter-point interest rate increases this year, after December’s first hike in more than nine years.
But since then Fed officials have clearly taken note of weaker growth conditions and markets are now pricing in no increase until 2017, and perhaps a cut at the March meeting.