CNY Falls to Year Low After Trading Band Extension

March 19, 2014 Share Print 0

The yuan fell more than 1 percent versus the U.S. dollar to its lowest level in almost a year on Wednesday in the Chinese currency’s biggest swing since its trading band was widened at the weekend.

And the move probably reflects Beijing showing that it means what it says when it comes to allowing greater two-way trade in its currency, analysts say.

“The yuan went to the weakest end of its band after the 2012 band widening, which was 1 percent above the mid-point [for dollar/yuan]. Now we’re there again, but now the top end of the band is 2 percent,” said Nizam Idris, managing director, head of strategy, fixed income and currencies at Macquarie Bank in Singapore.

“The only significance today is that we are the furthest away from the fixing than ever before because now we can be. This is probably a reflection of China justifying a widening of the band, showing that the yuan can use up more than a 1 percent move each day,” he added.

The yuan, also known as the renminbi, fell to 6.2003 per dollar, its lowest level since April 2013 and down 1.06 percent from a mid-point of 6.1351 to the dollar set by the central bank early on Wednesday.

via CNBC

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Alfonso Esparza

Senior Currency Analyst at Market Pulse

Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.