The yuan slid to a record discount to the central bank’s reference rate, nearing the limit of its trading band after data indicated that China’s manufacturing contracted in January for the first time since September 2012.
The currency dropped 0.12 percent to 6.2596 per dollar as of 10:06 a.m. in Shanghai, according to prices from the China Foreign Exchange Trade System. Today’s low of 6.2604 was 1.94 percent weaker than the daily fixing announced by the People’s Bank of China, which allows a maximum divergence of 2 percent. The monetary authority cut the reference rate by 0.02 percent to an eight-week low of 6.1385.
“Investors have turned more pessimistic on China’s economic outlook with the latest PMI,” said Stella Lee, Hong Kong-based president of Success Wealth Management Ltd. “The PBOC is facing pressure to weaken the fixing further as it’s unlikely to widen the trading band given the economic slowdown. The yuan is likely to trade weaker in the first half of 2015.”