The offshore yuan weakened to 6.52 against the dollar today, the lowest level since July last year.
Chinese policymakers sort of disappointed on expectations for a LPR cut this week but they are making up for that in supporting the economy through other means. The evident weakening of the yuan is one of that.
The Chinese currency is set for its biggest weekly drop against the dollar since the early days of the pandemic. And allowing it to weaken past 6.50 sets the stage for added weakness until we start to see local authorities step in.
The previous “range” that Chinese officials were comfortable with was around 6.30 to 6.40. We’re off now to figure out where exactly they’d be happy to see the currency hold next. The March 2021 high just above 6.58 will be one to watch as a break above that could hint at the PBOC wanting a much weaker currency to bolster exports.
As mentioned as well a few days back, the move here is also one to be mindful about as it also helps to provide a tailwind for the dollar in general.