Offshore Yuan Remains Under Pressure

The offshore yuan slid to around 6.68 per dollar on Wednesday, extending losses for a second consecutive session to a two-week low as investors continued to weigh Beijing’s aggressive move to curb the currency’s sharp rally. The central bank decided to raise the foreign exchange reserve requirement ratio to 6% from 4%, with investors viewing the policy adjustment as one of the central bank's most explicit interventions to date aimed at cooling the yuan's prolonged rally. The currency has appreciated roughly 5% year-to-date, supported by resilient export demand. Reinforcing the downward momentum, the PBOC set Wednesday’s daily midpoint fixing at 6.7180 per dollar, hitting its weakest setting since October 23 and 369 pips weaker than Reuters' expectations of 6.6811 per dollar. Meanwhile, China's Composite PMI fell to a three-month low of 52.0 in October from 52.4 in September, as the Services PMI declined to 50.8 from 51.6 and the Manufacturing PMI edged down to 52.0 from 52.1.