China's Yuan hit a four-year low yesterday, falling for a second day after authorities devalued it, and sources said clamour in government circles to help struggling exporters would put pressure on the central bank to let it drop lower still.
Spot Yuan in China slid to a low of 6.4510 per dollar, its weakest since August 2011, after central bank set its daily midpoint reference at 6.3306, even weaker than Tuesday's devaluation. The currency fared worse in global trade, touching 6.59 to dollar.
The central bank, which had described the devaluation as a one-off step to make the yuan more responsive to market forces, sought to reassure financial markets on Wednesday that it was not embarking on a steady depreciation.
The devaluation had sparked fears of a global currency war and accusations that Beijing was unfairly supporting its exporters.
"Looking at the international and domestic economic situation, currently there is no basis for a sustained depreciation trend for the Yuan," the People's Bank of China (PBOC) said.
Foreign exchange traders said state-owned banks were selling dollars on behalf of PBOC, and the spot market ended at 6.3870, after rallying strongly towards the close, which will influence Thursday's midpoint.
"Apparently, the central bank does not want the Yuan to run out of control," said a trader at a European bank in Shanghai.
Analysts at BMI downgraded their year-end forecasts for the currency to 6.83, down 10 percent from pre-devaluation levels.
The Yuan has lost 3.5 percent in China in the last two days, and around 4.8 percent in global markets.
