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[HONG KONG] China's yuan held steady against the dollar on Friday, but posted its biggest weekly loss on record due to the central bank's surprise move to devalue its currency.
The People's Bank of China (PBOC) set the midpoint rate at 6.3975 per dollar prior to market open, firmer than the previous day's closing quote 6.399.
The spot market closed at 6.3918 per dollar, 72 pips away from the previous close and 0.09 per cent away from the midpoint. The yuan fell by 2.9 per cent for the week.
The yuan fell for three consecutive days and had repeatedly touched fresh four-year lows since Tuesday, when the PBOC surprised the market by devaluing the yuan by nearly 2 per cent. "We believe that yuan may reach new equilibrium at around 6.4-6.5 levels, but short term volatility may remain higher," said Tan Suanjin, a portfolio manager at BlackRock.
Some banks revised down their forecast for the yuan to reach 6.5-6.6 by the end of the year. A Reuters poll conducted among 23 analysts showed that the yuan would fall to 6.45 in the next 12 months.
The spot rate is currently allowed to trade with a range 2 per cent above or below the official fixing on any given day.
The offshore yuan was trading 0.81 per cent away from the onshore spot at 6.444 per dollar.