China’s yuan weakens as domestic economic woes, hawkish Fed weigh

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SHANGHAI — China’s yuan weakened sharply

against a stronger dollar on Wednesday, amid worries about a

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domestic economic slowdown and further aggressive rate hikes by

the Federal Reserve.

Investors are awaiting the Fed’s annual Jackson Hole

symposium for more clues about monetary tightening, with Fed

Chair Jerome Powell due to speak on Friday.

The People’s Bank of China set the midpoint rate

at 6.8388 per dollar prior to market open, firmer than the

previous fix at 6.8523.

In the spot market, the yuan opened at 6.8430 per

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dollar and was changing hands at 6.8624 at midday, 257 pips

weaker than the previous late session close.

The yuan is currently hovering around two-year lows against

the dollar as Beijing steps up easing measures by cutting policy

rates to arrest an economic slowdown.

“USD-CNY has broken above the closely watched 6.80 level. We

think this means USD-RMB will trade in a new and higher range of

something like 6.75-7.00 for the rest of the year and into the

first half of next year,” said HSBC analysts in a note.

China’s economy is struggling to recover as it faces the

country’s dynamic zero COVID-19 policy and softening external

demand, they wrote.

State media said on Wednesday China’s yuan has no basis for

long-term depreciation, as the country’s strong exports should

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offset a buoyant dollar and hawkish Federal Reserve tightening.

Ken Cheung, Chief Asian FX Strategist at Mizuho Bank

pointed to the COVID resurgence and property sector rout that

will likely keep China’s growth momentum under pressure.

“The recent drought in Sichuan province just added concern

over the energy supply and disruptions on production,” Cheung


The U.S. dollar steadied just below recent peaks on

Wednesday, as investors waited to hear from the Fed and pondered

whether weak U.S. data may slow the pace of rate


Minneapolis Federal Reserve Bank President Neel Kashkari was

the latest official to reiterate the Fed’s focus on controlling

inflation ahead of all else, and said on Tuesday his biggest

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fear was underestimating the extent of price pressures.

The global dollar index rose to 108.666 from the

previous close of 108.624. The offshore yuan was

trading at 6.8724 per dollar.

The yuan market at 4:40AM GMT:


Item Current Previous Change

PBOC midpoint 6.8388 6.8523 0.20%

Spot yuan 6.8624 6.8367 -0.37%

Divergence from 0.35%


Spot change YTD -7.39%

Spot change since 2005 20.61%


Key indexes:

Item Current Previous Change

Thomson 0.0


CNH index

Dollar index 108.666 108.624 0.0

*Divergence of the dollar/yuan exchange rate. Negative number

indicates that spot yuan is trading stronger than the midpoint.

The People’s Bank of China (PBOC) allows the exchange rate to

rise or fall 2 percent from official midpoint rate it sets each



Instrument Current Difference

from onshore

Offshore spot yuan 6.8724 -0.15%


Offshore 6.7853 0.79%




*Premium for offshore spot over onshore

**Figure reflects difference from PBOC’s official midpoint,

since non-deliverable forwards are settled against the midpoint.


(Reporting by Shanghai Newsroom; editing by Richard Pullin)



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