China's yuan slips to new 5-1/2-year low, state banks sell US dollars

[SHANGHAI] The yuan slipped to a more than 5-1/2-year trough against the US dollar on Monday, hovering within a whisker of the psychologically important threshold of 6.7 per US dollar.

The Chinese currency hit an intraday low of 6.6998 in the morning before state banks were suspected of selling US dollars on behalf of the central bank around 6.6996, traders said, pulling the yuan back.

"That bout of intervention is not heavy. It's more like a signal," said a trader at a Chinese commercial bank in Shanghai.

"The market has become quite tame after last week's interventions," he added, referring to heavy state bank support in the past few sessions to bolster the yuan as the Chinese currency repeatedly broke through new 5-1/2-year lows.

The spot yuan opened at 6.6955 per US dollar and was changing hands at 6.6986 at midday, easing 0.15 per cent from the previous close.

The People's Bank of China set the midpoint rate at 6.6961 per US dollar prior to market open, 0.23 per cent weaker than the previous fix 6.6805, in response to the US dollar's broad gains against a basket of major currencies last Friday.

Net foreign exchange sales by the PBOC in June jumped to their highest in three months, as the central bank sought to shield the yuan from market volatility caused by Britain's decision to leave the European Union.

The central bank was believed to have injected forex liquidity in order to stabilise market expectations in June, which confirms a Reuters report that traders suspected the PBOC of intervention after Brexit.

The offshore yuan was trading 0.20 per cent softer than the onshore spot at 6.712 per US dollar.

REUTERS