Yuan Logs Lowest Rate vs U.S. Dollar: Bloomberg News

The onshore yuan reopened from a holiday on the back foot, despite a move by China to slow its slide with a stronger-than-expected reference rate for the managed currency.

Photo Insert: The yuan slid as much as 0.9% to a seven-month low of 7.2380 per dollar in Shanghai.

The yuan slid as much as 0.9% to a seven-month low of 7.2380 per dollar in Shanghai on Monday, as pessimism over the economic recovery and China’s policy divergence from peers continued to weigh on sentiment, Ran Li and Karl Lester M. Yap reported for Bloomberg News.

The offshore yuan declined 0.3%, also falling to the lowest since November. The People’s Bank of China (PBoC) sought to curb onshore currency weakness by setting its so-called fixing at the largest premium to estimates this year on Monday.

The move suggests the PBOC is growing increasingly uncomfortable with the weakness in the yuan, the worst performer in Asia in the past month.

Late in the afternoon on Monday, some state-owned Chinese banks were seen selling the greenback against the yuan, triggering a quick rebound in the currency that later faded, according to traders who asked not to be identified.

“It is possible for the yuan to weaken further in the near term as central banks of developed markets are more hawkish than expected and China's growth recovery slower than expected, especially with the absence of stronger stimulus,” said Becky Liu, head of China macro strategy at Standard Chartered Plc. in Hong Kong.

“The yuan could fall to about 7.3 per dollar, but by the end of the third or fourth quarter, we see room for it to stabilize and regain some ground.”

Optimism that authorities would support growth after the PBOC lowered a string of policy rates was dashed last week after banks only reduced a key lending benchmark by a moderate amount, kicking the yuan and stocks down their perch. The daily fixing limits the onshore yuan’s moves by 2% on either side.

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