Yuan Falls Sharply Against U.S. Dollar
"The market should be a little bit disappointed as most of the traders hoped that China's central bank should offer some sort of 'stability' amid rising market uncertainties," he said. "Undoubtedly, today's [yuan] fixing rates hint that the market should be prepared for more volatility."
The yuan's fall may be cushioned by the central bank again to avert panic selling. On Friday, traders said the PBOC moved to shore up the yuan's value via an intervention in the onshore market, after the currency fell to its lowest level in nearly 5½ years due to concerns about the U.K. referendum.
On Monday, traders said the PBOC was at it again with the aim of preventing the yuan from falling too sharply, after it earlier dropped below 6.6400 against the dollar.
"But the intervention appeared to be not as forceful as it used to be, which is a hint that the central bank is probably happy to see the yuan depreciate further, as long as the pace is controllable, to help boost the economy," a Shanghai-based senior trader at a domestic bank said.
"The sharply lower yuan fixing this morning also shows that the PBOC is trying to let the air out of the balloon a bit by bit, instead of seeing the bubble burst at one go," the trader added.
Given the central bank's more relaxed response thus far, selling pressure on the yuan doesn't seem to be as heavy as was previously feared. "Many of our clients are actually waiting on the sidelines, trying to figure out how the entire world is still responding to the Brexit outcome," the trader said.