Surging yuan takes a breather amid mixed credit data, easing expectations


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SHANGHAI — China’s yuan was little

changed against the dollar on Wednesday as traders weighed mixed

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credit data for COVID-hit December, though most analysts expect

a strong pick-up in borrowing as a post-pandemic recovery

gathers pace this year.

Traders also continued to debate the scope and timing of

further monetary easing which is expected in China in coming

month to support the economic rebound.

Although an expected cut in Chinese interest rates and

banks’ required reserve ratios (RRR) later this year could

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strengthen the U.S. yield advantage, the long-term appreciation

trend of the yuan remains on track, economists say.

The yuan has jumped roughly 1.8% against the dollar so far

this year to a near five-month high, buoyed by the abrupt

dismantling of China’s strict COVID-19 curbs in December which

were weighing heavily on consumer and business confidence and

economic activity.

But it steadied on Wednesday, trading around 6.7755 per

dollar by late morning.

Prior to the market open, the People’s Bank of China set a

weaker midpoint rate at 6.7756 per dollar.

Data on Tuesday showed new bank lending in China

unexpectedly rose in December from the previous month, setting a

new yearly record, but households were more wary about borrowing

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and aggregate financing missed expectations.

Muted yuan trading on Wednesday .”..underscored investor’s

intention to look past seasonal weakness in anticipation for

(a)demand recovery this quarter,” MayBank wrote in a note.

Morgan Stanley has bumped up its China growth, stock

market and yuan forecasts again, becoming the latest Wall Street

heavyweight to do so as the economy reopens. The bank raised its

target for the yuan to 6.65 per dollar.

Liu Ying, financial researcher at the Renmin University of

China, said expected monetary easing — including policy rate

and RRR cuts — could widen the U.S.-China yield spread and

curb the yuan’s climb in the short term.

While that could increase yuan volatility, “the big trend of

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yuan appreciation is inevitable,” she wrote in a commentary,

citing expectations of a robust economic rebound this year.

That view was echoed by Zhou Hao, chief economist at

brokerage house Guotai Junan International.

“While we do expect further policy easing by the Chinese

central bank in the coming year, the improving expectations on

economic growth suggest that market interest rates for yuan are

bias to the upside,” Zhou said in a note on Wednesday.

“The currency might still have upside potential if China’s

growth momentum accelerates.”

The yuan market at 3:21AM GMT:


Item Current Previous Change

PBOC midpoint


6.7756 6.7611

Spot yuan

6.778 0.02%


Divergence from



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Spot change YTD


Spot change since 2005

revaluation 22.13%

*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

* -0.14%



non-deliverable 2.15%

forwards 6.6332


*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 Kim Coghill)



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