China's yuan failed to sustain a decent momentum upwards and collapsed to its lowest level versus the US dollar late Monday ahead of high-level trade talks between the US and China this week.
The renminbi was down 0.20% to 6.8952/dollar late Monday in Hong Kong. The currency traded onshore below 0.18%, making it the worst-performing among Asian currencies, a Bloomberg report said.
Based on the Chinese currency exchange charts, the core parity rate of the yuan dipped 25 basis points to 6.8820 against the greenback on Monday and tracked to rally or decline by 2.1 % from its central parity level on each session.
In Hong Kong, the Chinese currency liquidity was less tight, making it affordable to 'short' the currency. The trading floor's overnight Hibor fell 133 basis-points during the last four sessions, its longest drop since December this year.
Trade officials from Washington and China will meet in Shanghai this week to tackle an economic gridlock in their long-standing trade dispute. But trade projections for any progress are bleak.
The weakening yuan also came after the People's Bank of China laid down the mid-point of the currency's daily trade-band at 6.8820 per US-dollar before trading commenced, weaker than its previous mark of 6.8797.
On the spot market, the Chinese currency opened the floor at 6.8802/USD and slipped to a low of 6.8965, its weakest since June 21. At noontime, the renminbi had climbed back to 6.893/USD, 134 pips below than its previous session close. Monday's level was the yuan's largest slide since July 5.
Slight differentials in the Chinese currency turned it into the world's slow-moving currencies lately. Investors had been bracing for the outcome of the Chinese-American trade talks. They are also keeping tabs on People's Bank of China response on the Federal Reserve's interest rate cuts later this week.
Meanwhile, a Shanghai bank trader said that corporate demand for the US greenback was among factors that keep the yuan from rallying. "It is likely that the market may adjust its positions prior to the US-China economic talks," Qi Gao, Asia-FX analyst at Scotiabank in Singapore, noted.
According to Gao, the yuan's continued slide likewise reflects the currency catching up after the ascent of some of its regional counterparts. But Gao downplayed the volume of the day's momentum versus the American currency, citing the renminbi's relative strength against a host of other currencies.
