The offshore yuan weakened to around 6.68 per dollar on Wednesday, extending losses for a second straight session to a two-week low, as investors continued to assess Beijing’s forceful move to rein in the currency’s sharp appreciation. The People’s Bank of China raised the foreign exchange reserve requirement ratio for financial institutions to 6% from 4%, a step widely seen as one of its clearest efforts so far to cool the yuan’s extended rally. The currency remains up roughly 5% year-to-date, supported by resilient export demand.
Adding to the downward pressure, the PBOC set Wednesday’s daily midpoint at 6.7180 per dollar, its weakest level since October 23 and 369 pips above (i.e., weaker than) Reuters’ consensus forecast of 6.6811. On the macroeconomic front, China’s Composite PMI slipped to a three-month low of 52.0 in October from 52.4 in September, as the Services PMI eased to 50.8 from 51.6 and the Manufacturing PMI edged down to 52.0 from 52.1.
