PBOC Lowers Reference Rate as China’s Yuan Falls for Second Day

China’s yuan declined for a second day as the central bank cut its daily fixing, forcing the currency to weaken to stay within the permitted trading range.

The People’s Bank of China set the reference rate 0.09 percent lower today at 6.2072 per dollar, 1.06 percent weaker than the spot rate’s close last week. The spot rate is allowed to diverge from the fixing by a maximum 1 percent. The Dollar Index (DXY) was headed for the biggest three-day gain since July as Group of Seven finance chiefs indicated they will tolerate the yen’s decline. China is testing the yuan’s exchange equilibrium and may soon double its trading band, Shanghai Securities News reported today, citing people it didn’t identify.

“The weaker fixing is in line with the dollar’s rally against Asian currencies after the G-7 meetings,” said Daniel Chan, a Hong Kong-based executive vice president at Glory Sky Global Markets Ltd. “There’s still speculation on yuan band widening, and I think it’s only a matter of time before it happens.”


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