Yuan inches up, but set for longest weekly losing streak since 2018 | Reuters
China's yuan inched up against
the dollar on Friday, while investors eyed U.S. jobs data that
could indicate the pace of recovery in the world's largest
economy for more trading cues.
But the yuan stayed on course for a seventh weekly drop, the
longest such streak since 2018, hit by a broad dollar strength.
The U.S. nonfarm payroll data, due later in the day, could
confirm the market view of a steady U.S. economic recovery and
prop up the dollar further, bringing volatility to other major
currencies, several yuan traders said.
Prior to market opening, the People's Bank of China (PBOC)
set the midpoint rate at 6.5649 per dollar, 65 pips
or 0.1% weaker than the previous fix of 6.5584.
In the spot market, onshore yuan opened at 6.5661
per dollar and was changing hands at 6.5625 at midday, 30 pips
firmer than the previous late session close.
Many market participants have squared their books before the
U.S. jobs data and the upcoming April 3-5 Tomb Sweeping holiday,
while overseas markets lack guidance as investors are away for
Easter holidays, some currency traders said.
"As USD/CNY is now increasingly reactive to the dollar
index, and COVID is yet to be under control in the U.S. and
Europe, we are revising our forecast of USD/CNY to 6.30 from
6.20 by the end of 2021," said Iris Pang, chief economist for
Greater China at ING.
The global dollar index is set for its third week of
gains on prospects of a solid economic recovery due to
accelerating vaccinations and massive fiscal stimulus.
Some other economists believed the continued capital inflows
following Chinese government bond's inclusion into global
indexes and relatively wide yield advantage between China and
other major economies were still supportive of the yuan.
"The CNY is likely to remain supported by China's solid
economic recovery and increasing capital inflows," said Li Wei,
senior China economist at Standard Chartered.
"While the USD may rebound modestly near-term on a strong
U.S. economic recovery, weak fundamentals – including record
trade and fiscal deficits – are likely to weigh on the USD in
the medium term," he added.
He maintained his forecast for the yuan to trade at 6.4 per
dollar at end-June but ease to 6.45 at end-2021.
The dollar index fell to 92.865 at midday, while the
offshore yuan was trading at 6.5694 per dollar.
The yuan market at 0400 GMT:
Item Current Previous Change
PBOC midpoint 6.5649 6.5584 -0.10%
Spot yuan 6.5625 6.5655 0.05%
Divergence from midpoint* -0.04%
Spot change YTD -0.52%
Spot change since 2005 revaluation 26.12%
Item Current Previous Change
Thomson Reuters/HKEX CNH index 96.59 96.63 0.0
Dollar index 92.865 92.898 0.0
*Divergence of the dollar/yuan exchange rate. Negative number
indicates that spot yuan is trading stronger than the midpoint.
The People's Bank of China (PBOC) allows the exchange rate to
rise or fall 2% from official midpoint rate it sets each
OFFSHORE CNH MARKET
Instrument Current Difference from onshore
Offshore spot yuan * 6.5694 -0.11%
Offshore non-deliverable forwards ** 6.7505 -2.75%
*Premium for offshore spot over onshore
**Figure reflects difference from PBOC's official midpoint,
since non-deliverable forwards are settled against the midpoint.
(Reporting by Winni Zhou and Andrew Galbraith; Editing by