JPMorgan sees yuan weakness continuing, possibility of "circuit breaker"

LONDON (Reuters) - Wall Street bank JPMorgan (NYSE:JPM) said on Tuesday it was staying "bearish" on China's yuan despite its recent slide and that the country's central bank could look to step in to prevent the move accelerating.

"As spot currency weakness and depreciation expectations tend to be self-reinforcing, the People's Bank of China might find it necessary to introduce some circuit breaker, with stronger fixings (the central bank's official daily FX rate) a preemptive move to prevent currency weakness going non-linear," JPMorgan's analysts said in a research note.

The yuan rallied on Tuesday after the central bank set its daily fixing stronger than market expectations for the second day in a row, bolstering speculation that authorities were becoming less tolerant of the currency's weakness.