China Weakens Yuan Fixing for Fourth Session as Dollar Advances

China's central bank weakened the yuan's daily guidance rate for the fourth consecutive session on June 18, 2024, signaling a flexible approach to currency management amid the US dollar's strengthening. The People's Bank of China (PBOC) set the yuan's reference rate at 7.1196 per dollar, which was 26 basis points lower than the previous day's fixing. This move aligns with market expectations for the PBOC to allow for gradual depreciation of the yuan as the US Federal Reserve maintains higher interest rates. The yuan has depreciated by approximately 2.1% against the dollar year-to-date. Analysts suggest that the PBOC is balancing the need to support economic growth through a weaker currency against the risk of capital outflows and imported inflation. The central bank has previously intervened to stabilize the yuan when it depreciated too rapidly, but current policy appears to favor a more managed decline. The yuan's onshore trading session opened at 7.2590 per dollar, trading within the 2% band around the daily fixing. The PBOC's daily fixing mechanism is a key tool for managing the yuan's value, allowing it to trade within a band around a predetermined reference rate.