Growth in China's factory activity stalled in March, with the Caixin/S&P Global manufacturing purchasing managers' index (PMI) falling to 50 in March, down from 51.6 in February. The private sector survey reading echoed the drop seen in the official PMI data released last Friday.
Still, while manufacturing data remained soft, "service PMI in March released last week showed a significant jump," said Christopher Wong, a FX strategist at OCBC Bank. "This underlines that China's gradual recovery is on track and is being driven by consumer spending." The spot yuan opened at 6.8800 per dollar and was changing hands at 6.8935 at midday, 190 pips weaker than the previous late session close and 0.19% weaker than the midpoint.
The People's Bank of China set the midpoint rate at 6.8805 per U.S. dollar prior to the market opening, weaker than the previous fix of 6.8717. The spot rate is currently allowed to trade within a range 2% above or below the official fixing on any given day. The yuan's drop was in line with other Asian currencies, such as the Korean won, as they were hit by a surprise supply cut announced by OPEC+ oil producers and Saudi Arabia on Sunday. Analysts expected the move could lift the price of oil by up to $10 a barrel, which could jolt global inflation higher, fuelling fears of global interest rates staying higher for longer.
The global dollar index rose to 102.959 from the previous close of 102.506.
The offshore yuan was trading 0.07% weaker than the onshore spot at 6.8982 per dollar.
Investors will be keenly watching U.S. non-farm payrolls data for March, slated for Friday, as a gauge for whether the U.S. Federal Reserve's attempts to cool the economy are working. A Reuters poll shows that the market is looking for 238,000 jobs added, down from 311,000 in February. The one-year forward value for the offshore yuan traded at 6.7375 per dollar, indicating a roughly 2.39% appreciation within 12 months.
The yuan market at 3:12AM GMT:
ONSHORE SPOT: Item Current Previous Change PBOC midpoint -0.13% 6.8805 6.8717
Spot yuan -0.28%
6.8935 6.8745
Divergence from
midpoint*
0.19%
Spot change YTD
0.09%
Spot change since 2005
revaluation 20.06%
OFFSHORE CNH MARKET
Instrument Current Difference
from onshore
Offshore spot yuan
* -0.07%
6.8982
Offshore
non-deliverable 2.06%
forwards 6.7415
**
*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 Kenneth Maxwell)
