SHANGHAI (Reuters) – The dollar edged higher in early trades on Wednesday, with its offshore trading tumbling to a record low, weighed down by expectations of a Federal Reserve interest rate hike.
China fell to 7.2349, the lowest level since this data became available in 2011. It was trading at 7.2286 per dollar as of 0241 GMT.
Its internal counterpart followed suit and fell to 7.2302 per dollar in early trading, the weakest since the global financial crisis in 2008. It was trading at 7.2240 at around 0241 GMT, compared to the previous late-night close of 7.18.
“All currencies other than the dollar crashed in early trade, and the yuan cannot escape,” said a trader at a foreign bank.
Several currency traders also said that corporate dollar buying was very strong on Wednesday, adding to pressure on the yuan.
Before the market opened, the People’s Bank of China (PBOC) set the mid-point rate at 7.1107 per dollar, 385 points or 0.54% weaker than the previous fix of 7.0722.
The declines come as China’s central bank on Monday announced new steps to slow the pace of the yuan’s recent decline by making betting on the currency more expensive.
Earlier this month, the People’s Bank of China (PBOC) also cut the amount of foreign exchange reserves that financial institutions must hold in a move also seen as aimed at slowing the yuan’s depreciation.
A second trader at a Chinese bank said the authorities’ efforts to stem the yuan’s weakening had had limited impact.
China’s monetary authorities are asking local banks to revive the yuan’s peg they abandoned two years ago as they seek to guide and defend the rapidly weakening currency, a source told Reuters late on Tuesday.
The dollar’s strength comes as the US central bank raised interest rates by three-quarters of a percentage point for the third time in a row last week, and indicated that borrowing costs will continue to rise this year.
