By Georgina Lee
HONG KONG, March 28 (Reuters) - China's yuan weakened on
Tuesday while holding to a narrow range, as investors waited on
the sidelines for further evidence that the country is on track
for a solid economic recovery after recent data gave mixed
signals.
The yuan meandered within a tight range of 133 pips during
the morning in directionless trade.
Some positive signs of recovery have emerged in China's
property sector, where secondary home sales have picked up since
the lunar new year in January due to pent-up demand, according
to a recent Bank of America report. The sector suffered from a
crisis of confidence last year when cash-strapped developers
left large volumes of homes unfinished.
But lackluster January and February data for profit at
industrial firms, released on Monday, showed that the world's
second-largest economy is still struggling to fully shake off
the long-term effects of the COVID-19 pandemic.
"The most important driver for the yuan is still about how
China's economic recovery will continue to unfold.
High-frequency data such as retail sales, mobility have shown
that a recovery is well under way," said Seong Kiyong, lead Asia
macro strategist at Societe Generale.
The spot yuan rate opened at 6.8700 per dollar
and was changing hands at 6.8816 at midday, 21 pips weaker than
the previous late session close and 0.10% weaker than the
midpoint.
The People's Bank of China set the midpoint rate at 6.8749 per U.S. dollar prior to the market open, weaker than
the previous fix 6.8714 and the lowest fixing in a week. The
spot rate is allowed to trade within a range 2% above or below
the official fixing on any given day.
Investors will be closely watching the China purchasing
managers' index due on Friday.
If the data shows further expansion of the service and
manufacturing sectors it will support the yuan, Seong said. He
expects the yuan to stay firm between 6.7 and 6.8 per dollar in
the next two months.
The global dollar index fell to 102.591 from the
previous close of 102.857, sliding for a second day as receding
fears of a full-blown banking crisis sapped demand for the
safest assets.
Investors found brief relief from U.S. lender First Citizens
BancShares' deal to buy failed peer Silicon Valley Bank on Monday, whose collapse this month triggered the worst banking
turmoil since the 2008 global financial crisis.
The offshore yuan was tracking closely with the
onshore spot at 6.8819 per dollar.
The one-year forward value for the offshore yuan traded at 6.7278 per dollar, indicating a roughly 2.29%
appreciation within 12 months.
The yuan market at 3:34AM GMT:
ONSHORE SPOT:
Item Current Previous Change
PBOC midpoint -0.05%
6.8749 6.8714
Spot yuan -0.03%
6.8816 6.8795
Divergence from
midpoint*
0.10%
Spot change YTD
0.27%
Spot change since 2005
revaluation 20.27%
OFFSHORE CNH MARKET
Instrument Current Difference
from onshore
Offshore spot yuan
* 0.00%
6.8819
Offshore
non-deliverable 2.19%
forwards 6.7274
**
*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 Edmund Klamann)
