SHANGHAI- China’s yuan fell to a one-year low against a strengthening dollar on Monday, extending losses after posting its worst week since 2015, as a worsening economic growth outlook drove investor concern that the currency had more room to fall.
Sentiment also took a knock on fears that strict lockdown measures will spread to Beijing, after the capital city required everyone living or working in Chaoyang district to take three COVID-19 tests this week and put more than a dozen buildings under lockdown.
Lockdowns in more than a dozen cities across the country, including the financial hub of Shanghai, have heightened worries over wider disruption to economic activity and raised some doubts whether China will be able to reach this year’s growth target of about 5.5 percent.
“Last Friday’s sharp CNY depreciation may mark an inflection point for further CNY depreciation, (should) market continue to focus on the negative yield spreads of China and near-term weak economic performance,” said Li Lin, head of global markets research Asia at MUFG Bank.
However, authorities have yet to show obvious discomfort about the rapid losses in the yuan, which has weakened about 2.6 percent since last Monday. And some analysts and traders said a weaker currency could alleviate some pressure on exporters, who are suffering from the lockdowns.
The People’s Bank of China (PBOC) set the midpoint rate on Monday at 6.4909 per dollar prior to market open, the weakest level since August 2021, not far from Reuters’ estimate of 6.4873.
