China’s yuan eases ahead of Fed decision; volume shrinks


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SHANGHAI — China’s yuan eased against

the dollar on Wednesday, with market participants cautious ahead

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a Federal Reserve policy meeting and largely shrugging off

strong upward adjustment of central bank guidance for the

currency’s trading midpoint.

Meanwhile, the fast spread of COVID-19 infections had also

dented sentiment, traders said.

The dollar/yuan rate “remains trapped by opposing forces of

concerns over the current COVID wave and news of further easing

of restrictions,” analysts at Maybank said in a note.

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Prior to market opening, the People’s Bank of China (PBOC)

set the midpoint rate at a new three-month high of

6.9535 per dollar, 211 pips or 0.3% firmer than the previous fix

of 6.9746.

In the spot market, the onshore yuan opened at

6.9480 per dollar and was changing hands at 6.9618 at midday,

118 pips softer than the previous late session close.

Trading was tepid in morning deals, with volume

of $9.1 billion around midday, compared with a

normal half-day volume of about $15 billion.

Cautious trading ahead of the closely watched Fed decision

due later in the session was among the key factors dampening

trading, which usually drop towards the year-end holiday

seasons, several currency traders said.

“Working from home in A-B teams due to recent spikes in

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COVID-19 infections has affected work efficiency,” said a trader

at a foreign bank.

Some of them also said regulators had offered support for

remote trading.

After delivering four consecutive 75-basis-point hikes, the

U.S. central bank is widely expected to increase interest rates

by 50 basis points as it concludes its two-day meeting on


“Interest rate differentials still favor USD …. But we

believe that (Chinese) exporters are more likely to convert

their USD into CNY because their historical behavior suggests

that they will buy CNY when it is strong and vice versa,”

analysts at Morgan Stanley said in a note.

The bank expects the Fed’s rate-hiking cycle to end in

January 2023 and projects another 3% of yuan appreciation

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against the dollar next year.

Chinese companies usually have higher demand for the local

currency for various payment needs in the run-up to the year-end

and Lunar New Year holidays.

By midday, the global dollar index had risen to

104.08 from the previous close of 103.98, while the offshore

yuan was trading at 6.9676 per dollar.

The yuan market at 0335 GMT:


Item Current Previous Change

PBOC midpoint 6.9535 6.9746 0.30%

Spot yuan 6.9618 6.95 -0.17%

Divergence from 0.12%


Spot change YTD -8.72%

Spot change since 2005 18.88%


Key indexes:

Item Current Previous Change

Thomson 0.0


CNH index

Dollar index 104.08 103.98 0.1

*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



Instrument Current Difference

from onshore

Offshore spot yuan 6.9676 -0.08%


Offshore 6.805 2.18%




*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 Brenda Goh)



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