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MNI: Yuan Weakness Seen Resuming As Exports Slow Amid Outflows

MNI (Singapore)
(MNI) Beijing

Less use of the counter-cyclical factor leaves the yuan vulnerable as growth slows.

True

A recent yuan rally looks set to reverse as export headwinds mount and amid signs the People’s Bank of China has reduced to use its so-called “counter-cyclical factor” in daily fixings, policy advisors and currency experts told MNI, anticipating a more volatile and broader trading range during the rest of the year.

A narrower gap between the PBOC’s fixing price and market estimates indicates the central bank has stepped back from supporting the currency, which saw its biggest one-day gain in 18 years on Nov 4 on hopes for the easing to the government’s Zero Covid policy, a Forex trader told MNI. But the yuan remains at risk from further capital outflows, slowing exports and sluggish domestic demand suppressed by ongoing pandemic outbreak and curbs, the advisors said.

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A recent yuan rally looks set to reverse as export headwinds mount and amid signs the People’s Bank of China has reduced to use its so-called “counter-cyclical factor” in daily fixings, policy advisors and currency experts told MNI, anticipating a more volatile and broader trading range during the rest of the year.

A narrower gap between the PBOC’s fixing price and market estimates indicates the central bank has stepped back from supporting the currency, which saw its biggest one-day gain in 18 years on Nov 4 on hopes for the easing to the government’s Zero Covid policy, a Forex trader told MNI. But the yuan remains at risk from further capital outflows, slowing exports and sluggish domestic demand suppressed by ongoing pandemic outbreak and curbs, the advisors said.

Keep reading...Show less