China’s central bank set the renminbi at its weakest level against the dollar in over 10 years on Tuesday, which investors have taken as a sign that a larger slip in the currency could be around the corner.
The People’s Bank of China set the daily rate at Rmb 6.9574 to the dollar, with the currency falling a further 0.02 when markets opened. The currency has not been given such a weak rate since May 2008, according to the Wall Street Journal.
The daily reference rate is set by the central bank based partly on the previous day’s closing price and overnight swings, but with some degree of deliberation to offset unwanted swings.
China’s policy makers face the dilemma of opening up the country’s financial markets to a greater role by investors in guiding price levels, while resisting the apparent downward pressure on the currency to avoid the exchange rate passing the symbolic Rmb 7 level.
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