China's yuan hits 13-month low on weaker fixing and depreciation bets

SHANGHAI (Reuters) – China's yuan fell to a fresh 13-month low against the dollar on Monday, weighing down a much weaker central bank fixing and expectations.

In addition to developments in the global trade environment, investors are focusing on the amount of liquidity policy makers have injected into the financial system.

"Together with the announcements by the People's Bank of China (PBOC), this is a change in the position of accommodative policy," analysts at Moody's said in a note.

Prior to market opening, the PBOC lowered the midpoint rate to 6.8131 per dollar, largely matching market forecasts, 189 pips or 0.28 percent weaker than the previous fix of 6.7942 last Friday.

In the spot market, the onshore yuan opened at 6.8159 per dollar and eased to a low of 6.8401 before changing hands at 6.8353 at midday, 213 pips weaker than the previous late session and 0.33 percent softer than the midpoint.

The onshore spot hits its lowest price since June 27, 2017.

The offshore yuan was trading 0.10 percent weaker than its onshore counterpart at 6.8422 per dollar as of midday.

Despite the recent sharp losses in the yuan, market sentiment remains relatively stable, traders said, adding there was some month-end demand on their corporate customers in morning trade on Monday.

A trader at a Chinese bank in Shanghai said the next resistance for the yuan is likely to be 6.9 per dollar.

Strategists at DBS Group Research have recalibrated their forecasts for the yuan to end 2018 to 6.90 per US dollar, with the US dollar to strengthen the US Federal Reserve's monetary tightening and more trade tensions in the second half of the year.

However, the yuan is implied in future value against the dollar on the forwards market on Monday, with one-year tenor of the dollar / yuan swap falling to -148 points at midday compared with last Friday's close of -80 points .

Analysts and Yuan Traders Assigned to the Cash Market.

Last week, the Chinese currency weakened 0.4 percent against the dollar, its seventh straight weekly loss. We have trade-weighted basis, it fell 0.9 percent against a basket of its trading partners' currencies, according to the Chinese Foreign Exchange Trade System (CFETS).

The index, published on a weekly and monthly basis, reported at 92.95 on Friday, CFETS said on its website.

The dollar was little changed against its major trading partners on Monday, as market attendees awaited key central bank meetings this week. [FRX/]

The global dollar index stood at 94.721 at midday, compared with the previous close of 94.675.

The Thomson Reuters / HKEX Global CNH index, which tracks the offshore against a basket of currencies on a daily basis, stood at 92.97, weaker than the previous day's 93.39.