The Australian dollar inched higher on Thursday as the yuan’s depreciation showed signs of slowing.
China’s yuan fell for a third day and eased about 0.3 per cent to 6.4090 versus the dollar, but held above a four-year low of 6.4510 set on Wednesday, as the central bank said there was no basis for further depreciation given strong economic fundamentals.
Banking sources said the
“There is a degree of calm returning to the market,’’ said Mitul Kotecha, head of Asia-Pacific FX strategy for Barclays in Singapore. “The market certainly perceives that the Chinese authorities don’t want the CNY to weaken too dramatically.’’
The Australian dollar, which is often used as liquid proxy for China plays, edged up 0.2 per cent to $0.7391, moving away from a six-year low of $0.7217 set on Wednesday.
China’s surprise yuan devaluation on Tuesday had stirred worries about the health of the Chinese economy and fanned fears of currency wars.
The US dollar gained some respite and edged up about 0.2 per cent against a basket of six major currencies to 96.420, away from a one-month low of 95.926 set on Wednesday.
Against the safe-haven yen, the dollar rose 0.1 per cent to 124.38 yen, although it still remained below a two-month high of 125.28 yen set on Wednesday.
“If risk-off type of trading recedes that should help support the dollar against the yen,’’ said Masashi Murata, currency strategist for Brown Brothers Harriman in Tokyo.
The euro slipped 0.1 per cent to $1.1143, having backed off from a one-month high of $1.1215 set on Wednesday.
Growing doubts that the Federal Reserve will hike interest rates in September had knocked the greenback lower on Wednesday.
Such uncertainty has increased after China’s surprise devaluation was seen as further clouding the outlook for the global economy.