Yuan dips but steady fixing ahead of China Congress limits losses

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SHANGHAI — China’s yuan weakened on

Friday after surging U.S. inflation data pointed to further

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dollar strength, although losses were capped by Beijing’s

efforts to steady the Chinese currency ahead of the Communist

Party Congress opening on Sunday.

The onshore yuan was changing hands at 7.1735 at

midday, slightly weaker than the previous late session close.

The currency fell more than 0.6% in late session trading on

Thursday to a two-week low of 7.2251, after data showed U.S.

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core inflation jumped the most in 40 years in September,

strengthening the case for further hefty rate hikes that will

bolster the dollar.

On Friday, the People’s Bank of China set the midpoint rate

at 7.1088 per dollar prior to market open, a level

that barely changed this week. The steady fixing helps anchor

the yuan ahead of Party Congress, analysts say.

President Xi Jinping will take the stage on Sunday to kick

off the historic congress, where he is poised to win a third

term that would solidify his place as China’s most powerful

ruler since Mao Zedong.

All eyes will be on his opening speech and various

leadership reshuffles, but analysts say the congress is unlikely

to trigger any immediate or dramatic changes in policy to revive

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the sputtering economy.

“Xi Jinping’s election is all but certain,” wrote Ales

Koutny, emerging markets portfolio manager at Janus Henderson

Investors.

“The main consideration for markets will be once the Party

Congress is out of the way, if China will renew its crackdown on

tech, property and other relevant industries,” Koutny said,

adding China’s stock and currency market weakness reflects

investor concerns.

Data released on Friday showed that China’s consumer prices

in September rose at the fastest pace since April 2020, while

China’s central bank chief promised stronger support for the

slowing economy.

However, Zichun Huang, an economist at Capital Economics,

said the weak yuan is limiting the PBOC’s options for

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stimulating the economy.

“The main constraint at the moment is the renminbi, which is

close to its weakest level in over a decade,” Huang wrote. “We

don’t expect policy rate cuts until pressure on the currency

eases.”

The yuan market at 4:54AM GMT:

ONSHORE SPOT:

Item Current Previous Change

PBOC midpoint

0.02%

7.1088 7.1101

Spot yuan

-0.05%

7.1736 7.1701

Divergence from

midpoint*

0.91%

Spot change YTD

-11.41%

Spot change since 2005

revaluation 15.37%

Key indexes:

Item Current Previous Change

Thomson

Reuters/HKEX 0.0

CNH index

Dollar index

112.422 0.1

112.363

*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

morning.

OFFSHORE CNH MARKET

Instrument Current Difference

from onshore

Offshore spot yuan

* -0.09%

7.1802

Offshore

non-deliverable 7.029 1.14%

forwards

**

*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)