HONG KONG China's yuan fell to fresh six-year lows against the U.S. dollar on Thursday after the central bank set a weaker midpoint for the fifth consecutive day to reflect a sharp rebound in the dollar overnight.
Traders and analysts said uncertainties over the yuan's direction have increased after Republican Donald Trump's surprise presidential election on Wednesday.
Trump had lambasted China throughout the election campaign, drumming up headlines with his pledges to slap 45 percent tariffs on imported Chinese goods and label the country a currency manipulator in his first day in office.
The People's Bank of China set the yuan's midpoint rate CNY=PBOC at 6.7885 per dollar prior to the market open, weaker than the previous fix of 6.7832.
In the spot market, the yuan CNY=CFXS opened at 6.7980 per dollar and was changing hands at 6.7906 at midday, 129 pips away from the previous late session close and 0.03 percent away from the midpoint.
"Trump's win has added to uncertainties over the yuan and whether the Fed will increase interest rates in December. Whether the yuan will continue to depreciate has a lot to do with Fed's rate decision," said Raymond Yeung, ANZ's chief economist of greater China.
"In the long run, the yuan still faces depreciation pressure, but China's central bank has tools to stabilize it."
There is a chance that a "lose-lose" situation for the U.S. and China can be avoided, but if Trump imposed the threatened tariffs and Beijing retaliated, there could be substantial volatility in global markets and additional depreciation pressures on the yuan, HSBC analysts said in a report.
The Thomson Reuters/HKEX Global CNH index .RXYH, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 94.62, firmer than the previous day's 94.36.
The offshore yuan was trading -0.29 percent weaker than the onshore spot at 6.8103 per dollar.
Offshore one-year non-deliverable forwards contracts (NDFs)CNY1YNDFOR=, considered the best available proxy for forward-looking market expectations of the yuan's value, traded at 6.976, -2.69 percent away from the midpoint.
One-year NDFs are settled against the midpoint, not the spot rate.
(Reporting by Michelle Chen; Editing by Kim Coghill)