China's yuan dips below key 6.7/dollar for first time since 2010

[F-22Raptor]

China's yuan slipped below the psychologically important level of 6.7 to the dollar for the first time in more than five years, after state bank support for the currency tapered off in late trade on Monday.

"State banks were quite firm in defending the yuan at 6.6990 before the official close, but since they get off work after 4:30 pm the rates fluctuated more wildly and hit 6.7," said a trader at a Chinese commercial bank in Shanghai.

"Whether the yuan will stay softer than 6.7 depends on the attitude of state banks tomorrow."

The yuan settled at 6.6987 per dollar at 4:30 p.m. (0830 GMT). It dipped to 6.7003 at 4:50 p.m. and then softened to 6.7021, its weakest since September 2010, before clawing back some ground. On Friday, it closed at 6.6883.

The People's Bank of China factors in the official closing level when it sets the next day's midpoint fixing, but the spot rate sometimes fluctuates widely until 11:30 p.m. when the evening session finally ends.

The yuan has now lost more then 3 percent of its value against the dollar so far this year, despite the government reiterating that it wants the currency's value to remain relatively stable and that it will not use the yuan to boost trade competitiveness.

The yuan had flirted with 6.7 for nearly two weeks before finally breaking through.

At the beginning of July, median forecasts in a Reuters poll anticipated the yuan would ease to 6.70 per dollar by end-December and fall further to 6.76 by end-June 2017.

Quoting policy sources, Reuters reported earlier this month that Beijing would tolerate a fall in the yuan to as low as 6.8 per dollar in 2016.

While China posted slightly stronger-than-expected economic growth for the second quarter last week, most analysts had expected downward pressure on the yuan to persist as exports remain weak and investment cools.

Concerns over whether Beijing will allow a sharper devaluation of the currency have added to financial markets' worries about the slowing global economy and the potential fallout from Britain's decision to leave the European Union.

"The PBOC let the CNY depreciate relatively fast over the past quarter, and the market does not really understand the rationale...In that situation the only thing to do is buy dollars," said Zhou Hao, senior emerging market economist at Commerzbank in Singapore.

"So I think the PBOC needs to clarify what kind of strategy or exchange rate path they're looking to see. It's an important psychological milestone and people will be wondering if there's anything behind it."

http://www.reuters.com/article/china-yuan-late-idUSL4N1A42IN

 

[billyong]

Lets say whatever you think this is about...Its not. Low Yuan is hurting US economy badly.

 

[Indika]

Low yuan makes export cheaper, but it also means in dollar terms the export value has not increased. It only benefits US as they can buy more chinese goods at same price meaning chinese need to work hard and americans work at the same pace but get more.

 

[Nan Yang]

Well let's compare the performance of all the other major currency of the world over the similar period.
The period of this chart is 5 years.

 

[Abacin]

Low yuan makes export cheaper, but it also means in dollar terms the export value has not increased. It only benefits US as they can buy more chinese goods at same price meaning chinese need to work hard and americans work at the same pace but get more.

It benefits US consumers but hurts US manufacturers. One day when US manufacturing power is really getting hurt, the foundation of US empire will collapse. China is trying to devalue Yuan at any possible chance, but I do not expect US to allow it. China and United States are the only two self-reliant complete industrial centers in this planet. Yuan and Dollar relations are very sensitive.

 

[Indika]

It benefits US consumers but hurts US manufacturers. One day when US manufacturing power is really getting hurt, the foundation of US empire will collapse. China is trying to devalue Yuan at any possible chance, but I do not expect US to allow it. China and United States are the only two self-reliant complete industrial centers in this planet. Yuan and Dollar relations are very sensitive.

That is partly true.
US labor cost is very high, they are rarely manufacture low end products as they are not profitable for internal consumption. They make more money out from services and exports of high end goods like military equipment.
If yuan was the base currency I can agree with you. If china becomes expensive they will import from else where. The dollar advantage is tremendous, they can print money and buy whatever they want, while rest of the world pays for it.

 

[C130]

China wants to devaule the Yuan to 10 to 1, but it'll probably settle around 8 to 1

That is partly true.
US labor cost is very high, they are rarely manufacture low end products as they are not profitable for internal consumption. They make more money out from services and exports of high end goods like military equipment.
If yuan was the base currency I can agree with you. If china becomes expensive they will import from else where. The dollar advantage is tremendous, they can print money and buy whatever they want, while rest of the world pays for it.

that's not entirely true

http://money.cnn.com/2016/03/17/news/economy/china-cheap-labor-productivity/

 

[Abacin]

That is partly true.
US labor cost is very high, they are rarely manufacture low end products as they are not profitable for internal consumption. They make more money out from services and exports of high end goods like military equipment.
If yuan was the base currency I can agree with you. If china becomes expensive they will import from else where. The dollar advantage is tremendous, they can print money and buy whatever they want, while rest of the world pays for it.

China is rapidly climbing up the manufacturing chain. More and more Chinese companies show its competitiveness in high end goods such as Huawei challenging Cisco in communication equipment and Apple in smartphone. China’s share of Asia’s exports of high-tech goods such as medical instruments, and aircraft and telecommunications equipment rose to 43.7 percent in 2014 from 9.4 percent in 2000, the ADB said. Japan’s share slid to 7.7 percent last year from 25.5 percent in 2000. A weak yuan is definitely helping this. China can take more share from Japan and the West in high end products.

However, a weak yuan can hurt financial power of China. One important factor for Dollar strength comes from its stability during last century. A stable range of yuan fluctuation can help China optimize the yuan value while a volatile range can hurt China.

China wants to devaule the Yuan to 10 to 1, but it'll probably settle around 8 to 1




that's not entirely true

http://money.cnn.com/2016/03/17/news/economy/china-cheap-labor-productivity/

Forget about 10 to 1. The peak of USD/CNY was 8.2. during last two decades, USD/CNY's range is 6.2 to 8.2. USD/CNY pair is relatively very stable. One important thing for Chinese government is to prove CNY can be as stable as USD. The first two decades was proved by some financial control. In the next decades, China want to prove it even when CNY is very liquid.

 

[dy1022]

China is hunting US in financial war!

More hot money and investers would stay in RMB rather than over rated USD in US, that means the USD can't rise the interest rates!

High position USD ( NASDAQ,etc) = high propobility to crash!!!


@mike2000 is back

My suggestion to all investers in here = keep buying more RMB , GBP( Great Britain Pound) or Gold during the next 6 -12 months time, sold out all USD( shares in NASDAQ,etc ) at the same period!