Date
16 January 2017
The renminbi is expected to lose further ground after China devalued the currency by about 1.9 percent on Tuesday. Photo: Bloomberg
The renminbi is expected to lose further ground after China devalued the currency by about 1.9 percent on Tuesday. Photo: Bloomberg

Renminbi seen depreciating further in near term

The renminbi could depreciate further in the near term, possibly losing another 3 percent by the end of this year, after the Chinese central bank slashed the daily fixing rate by 1.86 percent on Tuesday, according to some economists.

The chances are much lower now that the People’s Bank of China (PBoC) will expand the currency’s daily trading band, the Hong Kong Economic Journal cited Kelvin Lau, senior economist at Standard Chartered Bank Hong Kong, as saying.

Previously there had been expectations that the trading band could be widened to 3 percent from the current 2 percent level.

The unexpected devaluing fixing by the PBoC has caused the offshore renminbi exchange rate to decline over 2.9 percent at a point on Tuesday.

Economists with UBS have forecast that the Chinese currency could depreciate another 2.79 percent from Tuesday’s onshore closing rate of 6.3231 against the US dollar to 6.5 by the end of this year.

The exchange rate may further weaken to 6.6 in 2016, the bank said. 

An analyst with China Merchants Bank Co. (03968.HK) said it is unlikely that the central bank would allow any disorderly depreciation of the currency. Authorities will pay close attention to the market situation, he said.

[Chinese version中文版]

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