China’s yuan extended losses to a new 18-month low in early trade on Monday, breaching a key threshold, as persistent dollar strength and worries over the slowing economy piled more pressure on the currency.
Investors also anxiously awaited April trade data due later in the session to gauge the scope of disruptions from COVID-19 lockdowns.
Prior to market opening, the People’s Bank of China (PBOC) set the midpoint rate at 6.6899 per dollar, 567 pips or 0.85 percent weaker than the previous fix of 6.6332, the weakest since November 3, 2020.
Similar to last week, the official guidance came in firmer than market projections. Traders and analysts took that as a sign the authorities want to slow the currency’s descent.
Monday’s midpoint fixing was 51 pips stronger than Reuters’ estimate of 6.6950.
In the spot market, the onshore spot yuan fell below the psychologically important 6.7 per dollar to a low of 6.7110 before changing hands at 6.6936 as of 02:02 GMT, 285 pips weaker than the previous late session close.
Its offshore counterpart traded at 6.7337 per dollar.
“The strength of the US dollar and China’s COVID-19 policy and associated implementations were and likely continue to be the main themes affecting CNY and other Asian currencies in near term,” said Li Lin, head of global markets research for Asia at MUFG Bank.
Li cut her forecast for China’s full-year GDP growth to 4.3 percent from 5.2 percent previously, attributing the revision to China’s reaffirmation of its zero-COVID policy and continued stringent virus containment measures taken by local governments.
Shanghai authorities have tightened city-wide lockdown measures they imposed more than a month ago, prolonging into late May, an ordeal the capital Beijing wants to avoid by turning mass testing into an almost daily routine.