Sell Yuan Now – Goldman Sachs Yuan Reduces Record Rally The offshore yuan weakens and loses part of its record weekly rally as China’s central bank
Sell Yuan Now – Goldman Sachs
Yuan Reduces Record Rally
The offshore yuan weakens and loses part of its record weekly rally as China’s central bank upped daily fixing less than projected. Some analysts reaffirmed their bearish views on the currency.
The exchange rate fell 0.5 percent to 6.8224 to the USD as of 11:06 a.m. in Hong Kong, after a 2.5 percent surge in the last two days.
Bet against the Yuan
Goldman Sachs Group Inc. advised clients that the best times to bet against the yuan have been after interventions that led out bearish positions, or when China concerns were off traders’ radar screens.
Yuan weakens and was bearish in Hong Kong this week after interbank borrowing rates soared and Bloomberg News reported that policy makers are preparing contingency plans to help the exchange rate.
The move increased the offshore yuan’s premium over the onshore rate to 1.6 percent, the most since February 2016. Options traders raised expectations of future price swings to the highest level in 11 months.
Offshore Yuan Weakens
“The offshore yuan weakens and is sinking because there is some recovery in the USD, perhaps the unwinding of short-yuan positions has mostly been done, and it’s closing the gap with the onshore currency,” said Roy Teo, senior currency strategist at ABN Amro Bank NV in Singapore.
The yuan is likely to weaken this year as capital outflows continue and the U.S. Federal Reserve increases interest rates, Teo said.
PBC increased rate
The People’s Bank of China (PBC) increased its reference rate by 0.92 percent to 6.8668 per 1 USD, following a 1 percent drop in a gauge of the USD’s strength overnight.
The onshore yuan weakens and slumped 0.2 percent. Friday’s fixing was weaker than 6.87447 predicted by Mizuho Bank Ltd.and Australia & New Zealand Banking Group Ltd.’s 6.8456.
“This is a technical move in the dollar, and the PBOC took advantage,” said Irene Cheung, a Singapore-based foreign-exchange strategist at ANZ.
Yuan to slump further
The yuan could potentially fall further than 7.3 per USD by the year-end, Goldman’s emerging-market strategists led by Kamakshya Trivedi in London, predicted on Thursday. That’s more bearish than the 7.16 median forecast in a Bloomberg survey.
Benjamin Fuchs, chief investment officer at the $2 billion hedge fund BFAM Partners (Hong Kong), said that China’s moves to repeatedly tighten capital controls risk eroding confidence in its currency. The USD’s advance against the yen and other currencies is also increasing competitive pressure on China to let the yuan weaken, he said.