Yuan sinks; safe haven yen strengthens
London
CHINA'S yuan fell on Wednesday to its lowest since the 2010 opening of its offshore market, extending a slide that has unnerved global financial markets and sent currency investors rushing for the security of Japan's yen.
Big global banks forecast a 7 to 10 per cent weakening of the yuan over the next 12 months, but it has begun the year with a decline of almost 2.5 per cent in just three days. That almost matches August's one-off devaluation, which led to a global stock market selloff.
After the People's Bank of China again fixed its onshore rates for the yuan lower, the less-regulated offshore rates for the currency fell more than one per cent against the US dollar to a record low of 6.7315 in London trade. "Everyone has been taken by surprise by the scale of the volatility this week. It's all driven by China," said Gian Marco Salcioli, head of FX sales at Italy's Intesa Sanpaolo Banca IMI. "The question is how much of its reserves China is willing to put on the line (to defend the yuan)." Mr Salcioli said that few of the big Italian and European exporters serviced by Intesa, who are among those most exposed to Chinese growth, demand and moves in the yuan, had moved to sell. "That leads me to think there may be a lot of potential selling from corporates to co…
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