China’s yuan slumps to over 5-yr low on Brexit fears, c.bank suspected of intervention

By: | Published: June 24, 2016 11:09 AM

The yuan slumped to more than 5-year lows around midday on Friday, prompting the central bank to intervene via state banks' selling dollars as turmoil jolted global markets...

The People's Bank of China set the midpoint rate at 6.5776 per dollar prior to market open, 0.18 percent weaker than the previous fix at 6.5658. (Reuters)The People’s Bank of China set the midpoint rate at 6.5776 per dollar prior to market open, 0.18 percent weaker than the previous fix at 6.5658. (Reuters)

The yuan slumped to more than 5-year lows around midday on Friday, prompting the central bank to intervene via state banks’ selling dollars as turmoil jolted global markets in the wake of voting results suggesting Britain will opt to leave the EU.

Traders said state-owned banks were seen offering dollar liquidity in the market – the modus operandi the People’s Bank of China employs when intervening in the currency market.

Britain has voted to leave the European Union, the BBC said based on voter tallies from Thursday’s referendum, an outcome that would set the country on an uncertain path and deal the largest setback to European efforts to forge greater unity since World War Two.

“Brexit will be a total disaster in China’s FX market,” said a trader at a Chinese commercial bank in Shanghai, a comment that underscored wild gyrations in global markets that saw the sterling plunge and stocks put to the sword on Brexit anxiety.

The People’s Bank of China set the midpoint rate  at 6.5776 per dollar prior to market open, 0.18 percent weaker than the previous fix at 6.5658.

The yuan hit an intraday low of 6.6148 at 0245 GMT, weakening more than 0.5 percent compared with 6.5795 at the close on Thursday.

It trimmed some losses, trading at 6.6061 around midday due to suspected central bank intervention, traders said.     “Our mother has come!” exclaimed a trader at another Chinese commercial bank in Shanghai, referring to the nickname for the PBOC.

State-owned banks have engaged in dollar selling activities on behalf of the central bank so far this year to shore up the yuan when the Chinese currency has faced massive depreciation pressure.

The offshore yuan was trading 0.36 percent softer than the onshore spot at 6.6299 per dollar.

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