Today the onshore yuan has reached 6.92 per dollar, which is the lowest level since June 2008 and for the offshore yuan, it is the lowest level on record. The offshore yuan is currently trading at 6.95 per dollar. Every day, before trading opens the People’s Bank of China sets the midpoint for dollar/yuan exchange rate and the exchange rate is allowed to trade within 2 percent band on both sides. Recently People’s Bank of China weakened the fix for 12 consecutive days, which is an all-time record. The latest weakness in the exchange rate began on November the 3rd and the weakness gained pace after Republican Presidential candidate Donald Trump secured a surprise victory in the election on November 8th. Since then the exchange rate has weakened by 2.3 percent. In past one year, the yuan has weakened more than 8 percent.
In a June 15th article this year, named, “PBOC fixes Yuan to weakest since January 2011”, which is available at http://www.econotimes.com/, we suggested further weakness in the dollar/yuan exchange rate and forecasted it to reach 7 per dollar, once the future interest rate expectations from the US Federal Reserve steepens. We stand by our forecast and as of now we don’t see further downside beyond 7 per dollar, except for momentum move, without any significant retracement.
