U.S. retail sales rebounded sharply in January after two straight monthly declines, surging 3% in January and beating analysts' forecasts.
The U.S. data underlined the economy's continued resilience despite higher borrowing costs, and fueled market expectations that the Federal Reserve still has further to go in tightening rates. "Combined with the consumer price index data released earlier this week, investors' initial hope for a Federal Reserve's policy pivot to a rate cut has been completely reversed," said Kiyong Seong, lead Asia macro strategist at Societe Generale.
The spot yuan opened at 6.8500 per dollar and was changing hands at 6.8472 at midday, 43 pips stronger than the previous late session close and -0.07% away from the midpoint.
The People's Bank of China set the midpoint rate at 6.8519 per U.S. dollar prior to market open, weaker than the previous fix of 6.8183 and a six-week low. The spot rate is currently allowed to trade with a range 2% above or below the official fixing on any given day. The market is expecting another quarter percentage point hike each in March and May after the Fed raised its benchmark rates by 25 basis points to 4.5%-4.75% on Feb. 1.
While Fed chair Jerome Powell said on Feb. 1, at the conclusion of the last policy meeting, that he did not see any rate cutes this year, the market had initially bet that interest rate would still be lower by end of this year.
That expectation has now been unwound after the strong January retail sales figure, said Seong. The global dollar index fell to 103.633 from the previous close of 103.923.
The offshore yuan was trading 0.12% weaker than the
onshore spot at 6.8556 per dollar.
The one-year forward value for the offshore yuan traded at 6.6909 per dollar, indicating a roughly 2.46%
appreciation within 12 months.
The yuan market at 3:10AM GMT:
ONSHORE SPOT: Item Current Previous Change PBOC midpoint -0.49% 6.8519 6.8183
Spot yuan 0.06%
6.8472 6.8515
Divergence from
midpoint*
-0.07%
Spot change YTD
0.77%
Spot change since 2005
revaluation 20.87%
OFFSHORE CNH MARKET
Instrument Current Difference
from onshore
Offshore spot yuan
* -0.12%
6.8556
Offshore
non-deliverable 2.38%
forwards 6.6927
**
*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 Georgina Lee; Editing by Christian Schmollinger)
