The dollar wobbled after a slump in March U.S. manufacturing activity, which pointed to further signs of a slowing economy and trumped renewed inflation concerns following a surprise cut in output by OPEC+. The data showed U.S. manufacturing activity fell to its lowest in nearly three years in March, as new orders continued to contract. "So the narrative swung from inflation concerns on higher oil prices as OPEC+ producers cut output in early Asia towards growth fears as the U.S. key manufacturing gauge weakens," Maybank analysts said in a note. The People's Bank of China (PBOC) set the midpoint rate at 6.8699 to the dollar before the market opened, or 106 pips firmer than the previous fix of 6.8805.
In the spot market, the yuan opened at 6.8771 to
the dollar and was changing hands at 6.8842 by midday, or 72
pips weaker than the previous late session close.
The slide in the greenback prompted some corporate clients
to buy on the dip for their orders, currency traders said, but
added the recent surprise oil cut might have a bigger impact on
inflation, and influence the Federal Reserve's monetary outlook.
So the dollar index would not go down too much. "I don't see
clear direction for the yuan in the short term," said a trader
at a foreign bank.
Worries over geopolitical tension continued to weigh on
market sentiment, as U.S. House Speaker Kevin McCarthy is set to
host a meeting in California on Wednesday with Taiwan's
President Tsai Ing-wen.
China, which claims the island as its own territory, warned
McCarthy not to "repeat disastrous past mistakes" and meet Tsai,
saying the move would not help regional peace and stability, but
only unite the Chinese people behind a common enemy.
By midday, the global dollar index stood at 102.212,
while the offshore yuan was trading at 6.8865 per
dollar.
The yuan market at 0418 GMT:
ONSHORE SPOT:
Item Current Previous Change
PBOC midpoint 6.8699 6.8805 0.15% Spot yuan 6.8842 6.877 -0.10% Divergence from 0.21%
midpoint*
Spot change YTD 0.23%
Spot change since 2005 20.22%
revaluation
Key indexes:
Item Current Previous Change
Dollar index 102.212 102.093 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 6.8865 -0.03%
*
Offshore 6.7312 2.06%
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 Clarence Fernandez)
