Trading at 6.8532 to the dollar at 0225 GMT, the yuan has fallen more than 1.6 per cent against the greenback since the People's Bank of China (PBOC) surprised the market by lowering two key interest rates in the past week, becoming a major outlier in a global trend toward policy tightening.
The move widened policy divergence with other major economies and raised the risk of capital outflows and depreciation for the yuan.
But China's robust trade surplus should continue to provide support as exporters' conversion of their FX receipts would be an important factor stabilising the exchange rate, the official Shanghai Securities News cited Ding Muqiao, analyst at China Merchants Bank as saying.
Another state media outlet, Securities Times, also said China's strong trade surplus had long been providing solid support for the yuan.
"A moderate yuan depreciation is conducive to maintaining export competitiveness against the backdrop of the global economic downturn, and has positive implications for keeping the economy running in a reasonable range," the newspaper said on Wednesday.
China's export growth unexpectedly picked up speed in July, offering an encouraging boost to the economy as its struggles to recover from a COVID-induced slump.
"The exchange rate by contrast likely remains an effective monetary policy instrument, and there is certainly ample room for the trade-weighted renminbi to retrace at least part of its 11 per cent rise over the past two years," Alvin Tan, head of Asia FX strategy at RBC Capital Markets, said earlier this week.
Tan maintained his forecast for the yuan to trade at 7 per dollar by early 2023.
The yuan's CFETS trade-weighted basket index, a gauge that measures its strength against its major trading partners, stood at 102.33 on Wednesday and was down 0.14 per cent year-to-date, compared with spot yuan's loss of 7.3 per cent.
(Reporting by Winni Zhou and Brenda Goh; Editing by Simon Cameron-Moore)
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