SHANGHAI, March 8 (Reuters) - China's yuan weakened to a
more than two-month low against the dollar in early trade on
Wednesday, approaching the threshold of 7 per dollar, as Federal
Reserve Chair Jerome Powell's hawkish rhetoric on U.S. interest
rates lifted greenback broadly.
The dollar was pushed to three-month peaks by
Powell's warning that interest rates might need to go up faster
and higher than expected to rein in inflation.
The broad dollar strength pushed down the official yuan
guidance rate and the spot market. Before the market opened, the
People's Bank of China (PBOC) set the midpoint rate at 6.9525 per dollar, which was 369 pips or 0.53% weaker than
the previous fix of 6.9156 and the weakest in more than a week.
In the spot market, the onshore yuan opened at
6.9750 per dollar and fell to a low of 6.9782 in early trading,
the weakest level since Dec. 29, 2022. At 0157 GMT it traded at
6.9698.
Its offshore counterpart followed the weakening
trend to hit a low of 6.9952 per dollar, just steps away from
the psychologically critical 7 per dollar. At 0157 GMT it was at
6.9822 per dollar.
Traders said the firmer dollar and hawkish U.S. monetary
tightening outlook could pressure the yuan to weaken past 7 per
dollar. Financial market participants have long believed that a
breach of that threshold could trigger expectations of heavy
yuan depreciation and therefore risk capital outflow.
However, Yi Gang, governor of the central bank told a news
conference last week that 7 per dollar was not a "psychological
barrier".
(Reporting by Winni Zhou and Brenda Goh; Editing by Bradley
Perrett)
Messaging: winni.zhou.thomsonreuters.com@reuters.net))
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