Offshore Yuan Smashing Support Level Leaves Record Low in Sight

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Offshore Yuan Smashing Support Level Leaves Record Low in Sight

Forex3 hours ago (May 17, 2019 12:00AM ET)

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© Reuters. Offshore Yuan Smashing Support Level Leaves Record Low in Sight

(Bloomberg) — The offshore yuan is moving closer toward a record low after breaking through a key level late Thursday.

The currency slid as much as 0.4% overnight, weakening rapidly past the 6.92 per dollar level it had held below for the previous three days. It was trading at 6.9260 at 10:29 a.m. in Shanghai. The yuan’s low of 6.9895 was reached in January 2017.

A stronger dollar and the Trump administration’s threat to blacklist Huawei Technologies Co. from buying essential components are renewing pressure on the yuan, and widening its discount to the onshore exchange rate. The offshore currency has tumbled about 2.7% this month, making it one of the world’s worst performers.

Traders are now watching closely to see if it will slide to as low as 7 a dollar.

“Markets continue to fret about the impact of the escalation in trade tensions,” said Mitul Kotecha, a senior emerging-markets strategist at Toronto Dominion Bank. “Both the U.S. and Chinese sides appear to be digging in their heels, suggesting little chance of any resolution soon. I think 7 will be broken unless there is any progress on a deal.”

The authorities may intervene to prop up the currency if it reaches the 6.98-6.99 level, according to Ken Cheung, senior Asian FX strategist at Mizuho Bank Ltd.

It’s not just dollar-driven weakness. The yuan also fell for a 13th day against a basket of trading partners’ currency on Friday, the longest losing streak on record. The onshore yuan fell 0.24% to 6.9005 a dollar.

To contact Bloomberg News staff for this story: Claire Che in Beijing at yche16@bloomberg.net;Livia Yap in Singapore at lyap14@bloomberg.net

To contact the editors responsible for this story: Richard Frost at rfrost4@bloomberg.net, Magdalene Fung, Philip Glamann

©2019 Bloomberg L.P.

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