China's yuan was largely flat on Monday as investors
assessed domestic and global monetary policy outlooks and took a
cautious stance in the wake of mounting tensions in China-U.S.
relations.
China's currency remains under pressure as a slew of
U.S. data in recent weeks has bolstered market expectations that
the Federal Reserve will have to keep raising rates higher for
longer, which in turn have buoyed the dollar.
The People's Bank of China set the midpoint rate at 6.8643 per U.S. dollar prior to market open, slightly firmer than the previous fix 6.8659.
In the spot market, the yuan opened at 6.8680 per dollar and was changing hands at 6.8668 at midday, 7 pips softer from the previous late session close. As widely expected, China kept its benchmark lending rates unchanged for a sixth straight month in February, with the world's second-largest economy showing more signs of recovery from a pandemic-induced slump.
In the United States, however, markets are now expecting the Fed funds rate to peak just under 5.3% by July. "Looking ahead, a series of Fed's speeches and the FOMC(Federal Open Market Committee) minutes will be closely scrutinized to assess the Fed's policy outlook," said Ken Cheung, Chief Asian FX Strategist at Mizuho Bank. In a note to clients, China International Capital Corp said the U.S. dollar will likely maintain its uptrend ahead of U.S. job data in March. It expects the yuan to trade between 6.8 and 6.95 this week. On the geopolitical front, there was no sign of cooling China-U.S. tensions as U.S. Secretary of State Antony Blinken on Saturday warned top Chinese diplomat Wang Yi of consequences should Beijing provide material support to Russia's invasion of Ukraine. Wang also scolded Washington as "hysterical" in a running dispute over the U.S. downing of a suspected Chinese spy balloon. "The meeting between Wang Yi and Antony Blinken on the weekend did little to ease tensions between the two and instead adding more fuel to the fire," Maybank analysts said in a note.
By midday, the global dollar index was up at 103.977 from the previous close of 103.862, while the offshore yuan was trading at 6.8742 per dollar.
The yuan market at 4:05AM GMT:
ONSHORE SPOT:
Item Current Previous Change
PBOC midpoint 6.8643 6.8659 0.02% Spot yuan 6.8668 6.8661 -0.01% Divergence from 0.04%
midpoint*
Spot change YTD 0.48%
Spot change since 2005 20.53%
revaluation
Key indexes: Item Current Previous Change
Dollar index 103.977 103.862 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% from official midpoint rate it sets each
morning.
OFFSHORE CNH MARKET
Instrument Current Difference
from onshore
Offshore spot yuan 6.8742 -0.11%
*
Offshore 6.7136 2.24%
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 Shanghai Newsroom
Editing by Shri Navaratnam)
