The offshore yuan weakened to 6.52 against the dollar today, the lowest level since July last year.
Chinese policymakers have somewhat disappointed expectations of an LPR cut this week, but they are making up for it by supporting the economy in other ways. The obvious weakening of the yuan is one of them.
The Chinese currency is expected to see its biggest weekly drop against the dollar since the early days of the pandemic. And allowing it to weaken past 6.50 sets the stage for further weakness until we start to see local authorities step in.
The previous “range” that Chinese officials were comfortable with was around 6.30 to 6.40. We will now determine where exactly they would be happy to see the currency hold next. The March 2021 high just above 6.58 will be one to watch as a break above that could hint that the PBOC wants a much weaker currency to support exports.
As also mentioned a few days ago, the movement here is also something to consider as it also helps to provide a tailwind for the dollar in general.
If you have any query regarding content, please comment below. Thanks