SHANGHAI, March 24 (Reuters) - China's yuan weakened
against the dollar on Friday, pulling back from a five-month
high as investors awaited more clarity on the outlook for U.S.
interest rates while fresh diplomatic and trade tensions with
Washington weighed on sentiment.
The yuan fell 0.28% to 6.8478 in spot trade
around midday, even as the central bank set the midpoint at
6.8374, the highest level since Feb. 15.
The dollar was steady on Friday, near seven-week lows as
nervousness over the banking system kept investors skittish.
New signs of strains between Beijing and Washington have
also hampereconcernsappetite.
U.S. lawmakers on Thursday questioned TikTok's CEO about
potential Chinese influence over the platform, the latest
company to be in the cross-hairs of the Sino-U.S. conflict.
That comes after China's military on Thursday said it had
driven away a U.S. destroyer that entered waters around the
Paracel Islands in the South China Sea.
Meanwhile, traders are still assessing what the Fed's
most recent commentary means for monetary policy and some
analysts see a bearish bias for the greenback, which means the
Chinese currency still has potential to gain.
The Fed on Wednesday raised interest rates by 25 basis
points, as expected, but took a cautious stance on the outlook
because of banking sector turmoil.
"The market is still worried about the U.S. banking sector
and had divergent views over Fed decisions," said a trader at a
foreign bank.
Goldman Sachs analysts expect the Fed to deliver 25
basis-point hikes in May and June, and for the U.S. policy rate
to peak at 5.25-5.5% this year.
China International Capital Corp (CICC) says the dollar will
likely be curbed by worries about the risk of a banking crisis
and that the yuan has potential to reach 6.80 against the
greenback.
"We expect China's yuan to stabilise and a weakening dollar
will strengthen the yuan, but domestic ample liquidity will
offset that advantage," said Pang Xichun, research director at
Nanjing RiskHunt Investment Management Co.
The yuan market at 4:49AM GMT:
ONSHORE SPOT:
Item Current Previous Change
PBOC midpoint 0.49%
6.8374 6.8709
Spot yuan -0.23%
6.844 6.8286
Divergence from
midpoint*
0.10%
Spot change YTD
0.82%
Spot change since 2005
revaluation 20.93%
*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
* -0.01%
6.8448
Offshore
non-deliverable 6.699 2.07%
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 Sam Holmes)
