And the U.S. jobs data due on Friday could affect the Federal Reserve policy outlook and bring volatility to the dollar and other major currencies, they added. Prior to market opening, the People's Bank of China (PBOC) set the midpoint rate at 6.8747 per dollar, 48 pips weaker than the previous fix of 6.8699.
In the spot market, the onshore yuan opened at 6.8810 per dollar and was changing hands at 6.8799 at midday, 29 pips softer than the previous late session close on Tuesday. Chinese financial markets were closed for the Ching Ming Festival, known as the tomb-sweeping festival, on Wednesday. Currency traders said trading was slow on Thursday morning, with trading volume standing at $10.8 billion as of midday, down from a normal half-day volume of about $15 billion.
Tepid trading also came as some global markets will be closed for the Good Friday holiday.
Some domestic market participants covered their short positions in the greenback ahead of the U.S. non-farm payrolls. Markets will closely monitor the U.S. data and if the non-farm payrolls are weak, the Fed will turn more dovish, said a trader at a foreign bank. "However, that relationship seems to have shifted a tad as concerns of a sharper economic downcycle could also strengthen demand for safe haven USD," Maybank analysts said in a note. Separately, market analysts expect some downside room in the yuan this year. "Due to the recent incidents of SVB and other financial institutions, we expect a potential tighter liquidity condition in developed markets (DMs) compared with before, which could add an extra layer of constraint on economic development, and a subsequently more pessimistic exports outlook for China," analysts at MUFG Bank said in a note. They revised down their yuan forecasts to 6.65 per dollar at end-Q3 from 6.6 previously, and expect the yuan to finish the year at 6.55, down from 6.5 in an earlier prediction. Meanwhile, Standard Chartered said they have maintained their yuan forecasts for the remainder of this year, although the projections are weaker than the current level. "We maintain our USD/CNY forecasts of 6.80 for end-H1 and 6.75 for end-2023, and our 10-year China government bond (CGB) yield forecast of 3.0% for end-H1," Standard Chartered said in a note. By midday, the global dollar index rose to 102.032 from the previous close of 101.852, while the offshore yuan was trading at 6.8811 per dollar. The one-year forward value for the offshore yuan traded at 6.7321 per dollar, indicating a 2.21% appreciation within 12 months. The yuan market at 0326 GMT:
ONSHORE SPOT:
Item Current Previous Change
PBOC midpoint 6.8747 6.8699 -0.07% Spot yuan 6.8799 6.877 -0.04% Divergence from 0.08%
midpoint*
Spot change YTD 0.29%
Spot change since 2005 20.30%
revaluation
Key indexes:
Item Current Previous Change
Dollar index 102.032 101.852 0.2
*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 6.8811 -0.02%
*
Offshore 6.7365 2.05%
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 Winni Zhou and Tom Westbrook)
