China’s offshore currency continued to weaken against the dollar on Monday amid a world-wide stock selloff triggered by concerns about the broader impact of a potential collapse by major property developer Evergrande Group
The offshore yuan
which trades outside the country, weakened to as much as 6.4883 against the greenback. It’s lost around 0.9% since Wednesday, mostly because of a stronger dollar
Meanwhile, investors flocked to other traditional havens, such as Treasurys.
The Dow Jones Industrial Average
skidded more than 700 points on Monday, as investors weighed the potential fallout from looming debts coming due at Evergrande. Some commentators said it could even turn into a “Lehman Brothers moment” for China. Markets were closed in mainland China for a holiday, but the Hang Seng HK:HSI dropped more than 3%.
“China’s Evergrande is causing a lot of angst these days, but the moves in the offshore yuan are a little more contained than might be expected,” said Brad Bechtel, global head of foreign exchange at Jefferies in New York. The offshore yuan could weaken even further to 6.50 against the dollar — a level not seen since August — if angst around Evergrande grows, or could strengthen back to 6.40 or 6.35 if markets stabilize, he said.
“A lot depends on how the Evergrande situation resolves itself,” he said via phone on Monday, adding that he doesn’t expect the People’s Bank of China to intervene in currency markets. “I don’t expect it to be a financial crisis on a global scale, but there are still pockets of equity weakness out there.”