China Allows Yuan to Drop as Outflows, Dollar Test Central Bank’s Grip

00:00

00:00/00:00

Listen to this article 1x

For most of this year, Chinese authorities have maintained a strong hold on the yuan as a weak economy and the nation’s wide interest-rate gap with the U.S. favor the dollar. Photo: Bloomberg

(Bloomberg) — China signaled its permission for the yuan to weaken against the dollar, as a jump in capital outflows and a resilient greenback pressured the central bank into loosening its grip.

The People’s Bank of China (PBOC) weakened its daily reference rate for the yuan to a level unseen since January. The move came as the currency slid in the spot market this week amid signs investors are avoiding yuan-denominated assets for higher-yielding ones and bets the dollar will stay strong.