"Investors pessimism slightly picked up," said a trader at a Chinese bank. Prior to the market opening, the People's Bank of China (PBOC) set the midpoint rate at 6.8942 per dollar, 86 pips or 0.12% firmer than the previous fix of 6.9028.
In the spot market, the onshore yuan opened at 6.9139 per dollar and weakened to a low of 6.9220 at one point, the softest level since Jan. 3. By midday, it was changing hands at 6.9183, 95 pips weaker than the previous late session close. If the yuan finishes the late night session at that level it would have lost 0.75% to the dollar for the week. Several traders said they were watching the next support level of 6.95 per dollar after the spot price breached the psychologically critical 6.9 level.
But they also noted investors would quickly shift their focus to U.S. Personal Consumption Expenditures (PCE) price index, due for release later in the session. The data is expected to show a slower annual increase for January.
Recent strong U.S. economic data and hawkish rhetoric from Federal Reserve officials have underpinned the dollar and pressured non-dollar currencies including the yuan. Meanwhile, in China, analysts widely expect some improvements in the upcoming factory manufacturing data due on March 1, as Beijing's exit from its zero-COVID strategy should boost economic activity. "February's manufacturing PMI data will be a key mover of China's financial markets," analysts at ANZ said in a note. "We expect a stronger reading at 50.5, thanks to the reopening as well as post-holiday surge in production," they said, adding that it was unlikely that the PBOC would ease monetary policy in the near term. Separately, traders said market participants were watching out for the appointment of a new governor of the PBOC. Sources told Reuters that Zhu Hexin, a career banker and head of a state-run financial conglomerate was likely to be chosen. By midday, the global dollar index stood at 104.548, while the offshore yuan was trading at 6.9282 per dollar.
The one-year forward value for the offshore yuan traded at 6.7577 per dollar, implying a 2.52% appreciation within 12 months. The yuan market at 0319 GMT:
ONSHORE SPOT:
Item Current Previous Change
PBOC midpoint 6.8942 6.9028 0.12% Spot yuan 6.9183 6.9088 -0.14% Divergence from 0.35%
midpoint*
Spot change YTD -0.26%
Spot change since 2005 19.63%
revaluation
Key indexes: Item Current Previous Change
Dollar index 104.548 104.598 -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 6.9282 -0.14%
*
Offshore 6.7614 1.96%
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 Simon
Cameron-Moore)
