China's yuan jumps on signs of economic recovery, market awaits global cbank meetings

SHANGHAI, Jan 30 (Reuters) - China's yuan jumped against the dollar on the first trading day after the week-long Lunar New Year holidays on Monday, as investors cheered signs of economic recovery suggested by robust holiday spending and tourism data. Official data showed that Lunar New Year holiday trips inside China surged 74% from last year after authorities scrapped COVID-19 travel curbs, though the number of journeys was still only half of pre-pandemic levels. "We expect the RMB continue to enjoy the support from the reopening optimism," said Tommy Xie, head of Greater China research at OCBC Bank. "The ongoing inflows into China's financial market will overshadow the concerns about the widening service trade deficit due to rising outbound travel." China's blue-chip CSI 300 Index surged to a half-year high in early deals. Prior to market opening, the People's Bank of China (PBOC) set the yuan's midpoint rate at 6.7626 per dollar, 76 pips or 0.11% firmer than the previous fix of 6.7702.

In the spot market, the spot yuan opened at 6.7450 per dollar and firmed to 6.7429, the strongest level since Jan. 18. By midday, it gave back those gains and was trading at 6.7562, 393 pips firmer than the previous late session close.

The absence of any sign of a second wave of COVID-19 infections during the holidays encouraged investors, traders said. "Sentiment was further supported by the fact that COVID infections do not appear to have gotten out of control during the long holiday, despite the increase in mass travel during Chinese New Year," analysts at Maybank said in a note. But some currency traders also noted that a slew of global central bank meetings this week, including the Federal Reserve, the European Central Bank and the Bank of England, could keep the yuan strength in check, while China is also scheduled to release its January manufacturing activity data. The Fed is widely expected to hike interest rates by 25 basis points this week, but any surprise could bring volatility to the dollar and other major currencies. By midday, the global dollar index rose to 101.945 from the previous close of 101.927, while the offshore yuan was trading at 6.756 per dollar.

The one-year forward value for the offshore yuan traded at 6.6248 per dollar, indicating a roughly 2% appreciation within 12 months. The yuan market at 0305 GMT:

ONSHORE SPOT: Item Current Previous Change PBOC midpoint 6.7626 6.7702 0.11% Spot yuan 6.7562 6.7955 0.58% Divergence from -0.09%
midpoint*
Spot change YTD 2.13% Spot change since 2005 22.50% revaluation

Key indexes: Item Current Previous Change

Dollar index 101.945 101.927 0.0
*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 morning. OFFSHORE CNH MARKET
Instrument Current Difference from onshore Offshore spot yuan 6.756 0.00%
*
Offshore 6.6245 2.08% non-deliverable
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 Winni Zhou and Brenda Goh; Editing by Simon Cameron-Moore)

Messaging: winni.zhou.thomsonreuters.com@reuters.net))

Reuters

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