China’s yuan slips but supported by firm fixings, pause in easing


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SHANGHAI — China’s yuan slipped against a

strengthening dollar on Thursday, but it drew support from

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persistently firmer-than-expected official midpoint fixings and

a pause in the central bank’s monetary easing efforts.

The People’s Bank of China (PBOC) partially rolled over

maturing medium-term policy loans while maintaining the interest

rate as expected, with hawkish U.S. Federal Reserve tightening

leaving it limited room to maneuver on monetary policy.

“The PBOC has demonstrated its stance to defend the RMB

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exchange rate from breaking above 7 handle shortly and a rate

cut will contradict such objective,” Ken Cheung, chief Asian FX

strategist at Mizuho Bank, said in a note.

The Chinese central bank’s surprise cuts to key interest

rates in August accelerated the yuan’s declines, taking it to

two-year lows with a loss of more than 3% in a month.

Prior to the market opening, the PBOC continued to set the

midpoint rate above market projections, traders said,

in an attempt to curb rapid yuan depreciation during the recent

dollar rally.

It fixed the guidance on Thursday at 6.9101 per dollar, 15

pips firmer than the previous fix of 6.9116 and 52 pips stronger

than the Reuters estimate of 6.9153.

“The PBOC continued to rely on daily fix to manage and guide

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RMB moves,” analysts at OCBC Bank said in a note.

“Stronger fix could continue to be featured but could only

serve as an attempt to slow the pace of RMB depreciation.”

In the spot market, the onshore yuan opened at

6.9680 per dollar and was changing hands at 6.9666 at midday, 36

pips weaker than the previous late session close.

Several currency traders said they have recently adopted a

rangebound, “buy low, sell high” trading strategy to liquidate

long dollar positions around 6.97 per dollar.

“The strong dollar capped the upside room for the yuan,

while too much weakness (in the Chinese currency) could trigger

state bank actions,” said a trader at a foreign bank.

Investors will shift their attention to August activity

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indicators due on Friday to gauge the health of the world’s

second-largest economy.

In global markets, the dollar stood near recent peaks

as markets increased bets that the Federal Reserve has more work

to do in its aggressive tightening streak to curb inflation.

By midday, the global dollar index rose to 109.714

from the previous close of 109.658, while the offshore yuan

was trading at 6.9743 per dollar.

The yuan market at 0400 GMT:


Item Current Previous Change

PBOC midpoint 6.9101 6.9116 0.02%

Spot yuan 6.9666 6.963 -0.05%

Divergence from 0.82%


Spot change YTD -8.78%

Spot change since 2005 18.80%


Key indexes:

Item Current Previous Change

Thomson 0.0


CNH index

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Dollar index 109.714 109.658 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 percent from official midpoint rate it sets each



Instrument Current Difference

from onshore

Offshore spot yuan 6.9743 -0.11%


Offshore 6.8855 0.36%




*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; Editing by Edmund




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