China’s yuan flat as grim industrial profit data offsets reopening optimism
SHANGHAI — China’s yuan was roughly
flat versus the dollar on Tuesday in thin trading, as weak
industrial profit data offset optimism over the country’s steps
to reduce COVID-19 curbs and reopen the economy.
The onshore yuan rose as much 0.28% to a near
two-week high of 6.9434 per dollar in early morning trade, after
China’s central bank set a firmer midpoint rate.
But the Chinese currency gave up all the gains by the lunch
break, trading around 6.9620 at midday.
The yuan was initially supported by news that China will
stop requiring inbound travelers to go into quarantine starting
from Jan. 8, representing a major step towards easing COVID
curbs on its borders, which have been largely shut since 2020.
China’s health authority also said late on Monday that the
country’s management of COVID will be downgraded to the less
strict Category B from the current top-level Category A.
But the upbeat mood was soon curbed by the latest data
showing profits at China’s industrial firms contracted further
in the January-November period, when strict COVID-related
restrictions disrupted factory activity and supply chains.
Industrial profits fell 3.6% during the first 11 months of
the year to 7.7 trillion yuan ($1.11 trillion). That compares
with a year-on-year drop of 3.0% for January-October.
The data served as a reminder to traders that China’s
economy is still expected to struggle over the winter months as
much of the population becomes infected with coronavirus and
unable to work while recovering.
In its 2023 outlook report, Chasing Securities said that an
expected economic growth of 5.1% for China next year would
provide a solid foundation for the yuan, but conditions are not
ripe for an appreciation cycle for the Chinese currency.
The brokerage expects the yuan to fluctuate against the
dollar next year.
The yuan market at 3:33AM GMT:
Item Current Previous Change
Spot change YTD
Spot change since 2005
*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
Offshore spot yuan
*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 Shanghai newsroom; Editing by Kenneth Maxwell)
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