Renminbi hits annual low vs dollar

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The yuan is on track for its greatest yearly slide versus the dollar despite Beijing's best efforts to stop it.

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Growing monetary policy divergence between China and the US pressures exchange rate stability.

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The renminbi's rapid decline comes as China's Communist party prepares for a leadership session in October, where President Xi Jinping is anticipated to win a third term.

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The renminbi's 8.7% slide versus the dollar this year to Rmb6.96 puts it on course for its largest yearly fall since China abandoned its currency peg in 2005.

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The sell-off began when Xi's draconian Covid-zero policy closed down Shanghai's financial hub in April and increased as the dollar surged against a host of foreign rivals.

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Analysts and economists warned of additional devaluation as the US Federal Reserve raises interest rates and China's central bank maintains loose policies to stabilize the economy.

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The People's Bank of China put the renminbi's dollar trading band midpoint at its weakest level in two years last week.

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It also reduced banks' foreign currency holdings, making it more appealing to wager against the dollar. Beijing uses such cuts to discourage renminbi bets without intervening directly.

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Chinese officials support the yuan and caution against devaluation rumors. Beijing's indirect initiatives to strengthen the RMB make profiting from its drop impossible.

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Liu Guoqiang, vice-governor of the PBoC, told reporters in Beijing last week that the renminbi's "precise exchange rate is hard to anticipate"

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He continued, "We want a reasonable exchange rate and market stability."

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Analysts claimed the deepening difference in monetary policy between the US and China drove the depreciation, as dollar-denominated securities returned more.

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Although Rmb7 per dollar is predicted for the first time in two years, few expect depreciation to approach Japan's yen, which has plummeted a quarter this year.

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Bloomberg polled economists and found the median prediction was Rmb6.8 per dollar.

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