SHANGHAI (Reuters) -- China's yuan eased further, touching a more than 19-month low against the dollar on Friday and breaching a key threshold, and looked set for the sixth straight weekly losses.
The Chinese currency has lost more than 6% against a strengthening dollar over the past four weeks, a sudden, deep plunge for the yuan, which has long been tightly managed and usually moves within thin ranges.
"We feel the Chinese authorities are comfortable in letting the CNY weakening further, so long as the depreciation remains orderly," said Becky Liu, head of China macro strategy at Standard Chartered. "FX policy appears to be one of the options to alleviate growth pressure, via alleviating exports pressure."
Liu noted that China is facing increasing downward growth pressure, and sees little room to alter its zero-COVID policy, while domestic monetary policy easing is constrained by a hawkish Federal Reserve.
Before the market opened, the People's Bank of China (PBOC) set the midpoint rate at a fresh low of 6.7898 per dollar, 606 pips or 0.9% weaker than the previous fix, 6.7292, but 57 pips firmer than Reuters' estimate of 6.7955.
In the spot market, the onshore yuan opened at 6.7900 per dollar and quickly weakened past 6.8 to a low of 6.8150, the softest level since Sept. 30, 2020.
By midday, it was changing hands at 6.7925, 53 pips weaker than the previous late-session close.
Currency traders said the absence of discomfort among the authorities over the recent yuan weakness, other than firmer-than-expected midpoint settings, have encouraged some investors to test new lows in the currency.
"While likely related to portfolio outflows, the move is getting compounded by the PBOC's hands-off stance, which is adding to the local USD buying frenzy," said Stephen Innes, managing partner at SPI Asset Management.