Yuan withstands global currency rout as Brexit concern mounts

[SHANGHAI] China's yuan withstood global volatility in currencies after early results in Britain's European Union referendum showed greater support than had been predicted for leaving the bloc.

The yuan slipped 0.2 per cent to 6.5913 per dollar at 9:56 am in Shanghai. By 2.15 am in London, 1.6 million votes had been cast for a so-called Brexit, just over 30,000 more than those for staying. The pound sank as much 5.8 per cent against the dollar and the euro and Australian dollar lost at least 1 per cent, while the yen jumped. The offshore yuan weakened 0.2 per cent in Hong Kong.

Investors have been glued to the UK's debate on EU membership in recent weeks as governments and central banks around the world warned that a vote for so-called Brexit could hurt global economic growth and destabilise financial markets.

"It's still too early to call, but so far the yuan looks to stand out among currencies as the market isn't fully opened yet to global investors," said Li Liuyang, Shanghai-based market analyst at Bank of Tokyo-Mitsubishi UFJ (China) Ltd.

"In the case of a Brexit, the spillover impact on the yuan will be negative in the short-term."

The European Union was China's largest trading partner last year, with two-way trade totaling US$564.9 billion, according to customs data. The Chinese currency has fallen against all but one of 30 major global peers in the past month, including losses of more than 6 per cent versus the South African rand and the New Zealand dollar, while a Bloomberg replica of CFETS RMB Index is near the lowest level since 2014.

BLOOMBERG