The yuan ignored a declining dollar to drop to an eight-year low, with banks slashing their forecasts for China’s exchange rate amid concern an imminent Federal Reserve interest-rate increase will accelerate capital outflows.
The currency fell to 6.8703 against the greenback, the weakest since December 2008 and beyond a Bloomberg survey’s year-end median estimate of 6.8. A gauge of dollar strength dropped for a second day after posting the biggest four-day rally in seven years following Donald Trump’s surprise win in last week’s presidential election. The Republican has promised to label China a currency manipulator and slap tariffs on the nation’s exports.
Standard Chartered Plc Wednesday joined at least four other banks in lowering its forecasts for the yuan, predicting a year-end level of 6.9, compared with 6.75 earlier. The odds of Fed tightening this year have shot up to 94 percent amid speculation the U.S. monetary authority will move to cap inflation as a Trump-led administration steps up spending. This would reduce the allure of emerging-market assets.