The Consumer price index (CPI) for February was 1.0% higher than a year earlier, rising at its slowest since February 2022 and below median estimate for a rise of 1.9% given by a Reuters poll. The producer price index (PPI) in February fell 1.4% from a year earlier, marking a fifth consecutive month of producer price deflation.
While falling inflation could leave room for the central bank to cut rates, such expectations have fallen by the way side after the a moderate target of 5% annual economic growth was set by the government at the opening of the National People's Congress on Sunday, said Alvin Tan, head of Asia currency strategy at RBC Capital Markets.
"As the government has set an annual growth target at the
lower end of expectations, I don't expect that authorities would
feel compelled to boost growth significantly" through rate cuts
or stimulus, said Tan.
The spot yuan opened at 6.9600 per dollar and was
changing hands at 6.9671 at midday, 106 pips weaker than the
previous late session close and 0.01% away from the midpoint.
The People's Bank of China set the midpoint rate at 6.9666 per U.S. dollar prior to market open, weaker than the previous fix 6.9525 and the weakest in over two months. The spot rate is currently allowed to trade within a range 2% above or below the official fixing on any given day. U.S. Federal Reserve Chair Jerome Powell on Wednesday reaffirmed his message of higher and potentially faster interest rate hikes. He emphasized that debate was still underway with a decision hinging on data to be issued before the U.S. central bank's policy meeting on March 21-22. The market is keenly watching whether the Fed will raise its policy rate by 25 basis points or more. Investors reckon that U.S. rates staying high for longer would weigh on the yuan.
The offshore yuan was trading 0.15% weaker than the onshore spot at 6.9773 per dollar.
The one-year forward value for the offshore yuan traded at 6.7811 per dollar, indicating a roughly 2.89%
appreciation within 12 months.
The global dollar index was 105.629, slightly below
the previous close of 105.658.
The yuan market at 3:40AM GMT:
ONSHORE SPOT: Item Current Previous Change PBOC midpoint -0.20% 6.9666 6.9525
Spot yuan -0.15%
6.9671 6.9565
Divergence from
midpoint*
0.01%
Spot change YTD
-0.96%
Spot change since 2005
revaluation 18.79%
OFFSHORE CNH MARKET
Instrument Current Difference
from onshore
Offshore spot yuan
* -0.15%
6.9773
Offshore
non-deliverable 2.62%
forwards 6.7885
**
*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 Simon Cameron-Moore)
