Sing dollar falls sharply; market 'shocked' by weaker yuan fixing

THE Singapore dollar fell sharply on Wednesday after a weaker-than-expected yuan fixing by China's central bank.

The SGD was quoted at 1.4324 to the US dollar at 3.24pm, according to Bloomberg, just shy of the 52-week low of 1.4342 on Oct 2, 2015.

Wednesday's move up in the USD-SGD could largely be due to the 150 basis-point jump in the USD-CNY fixing, said Saktiandi Supaat, Maybank head of foreign-exchange research.

This is due to the much weaker yuan reference rate that the People's Bank of China (PBOC) had set at 9.15am, said United Overseas Bank economist Francis Tan.

"Market was shocked by it, I think . . . and felt that there could be some 'competitive devaluation' coming up and so start to short SGD (and even regionals too)," said Mr Tan.

The yuan fell to a five-year low after the PBOC cut its daily fixing to the lowest level since April 2011, weaker than the yuan's last onshore closing level, reported Bloomberg.