The People's Bank of China set the midpoint rate at 6.8987 per U.S. dollar prior to market open, weaker than the previous fix 6.8731. The spot rate is currently allowed to trade with a range 2% above or below the official fixing on any given day. Policymakers' decision to keep the medium-term lending facility (MLF)and loan prime rates (LPR) unchanged for an eighth straight month was largely expected.
The one-year LPR and five-year LPR were unchanged at 3.65% and 4.3% respectively.
The People's Bank of China (PBOC) said it was keeping the
rate on 170 billion yuan ($24.75 billion) worth of one-year
medium-term lending facility (MLF) loans to
some financial institutions unchanged at 2.75% from the previous
operation. The last time MLF rate was cut was in August 2022.
"Given the strong rebound that we have seen from the first
quarter economic data, there is no urgency to provide further
easing at this stage," said Khoon Goh, head of Asia research at
ANZ.
The central bank would only likely consider easing further if
the momentum of the recovery were to wane going forward, Goh
said. China's first quarter gross domestic product grew 4.5%
year-on-year, beating expectations.
The market expects the U.S. central bank to raise interest rates by 25 basis points in its upcoming policy meeting in May before halting further rate hikes.
Fed officials have adopted a hawkish tone on the need to keep hiking rates in order to bring down inflation even as markets price for likely rate cuts later this year. Given the still wide interest rate differential between China and the United States, exporters in China are holding onto their dollar export receipts to earn a higher yield on these proceeds rather than converting them into yuan, said Goh. This has also kept a lid on the yuan's strength.
The global dollar index eased marginally to 101.961 from the previous close of 101.968.
The offshore yuan was trading 0.08% weaker than the onshore spot at 6.895 per dollar.
The one-year forward value for the offshore yuan traded at 6.7275 per dollar, indicating a roughly 2.49% appreciation within 12 months. The yuan market at 3:40AM GMT:
ONSHORE SPOT: Item Current Previous Change PBOC midpoint -0.37% 6.8987 6.8731
Spot yuan -0.07%
6.8896 6.8851
Divergence from
midpoint*
-0.13%
Spot change YTD
0.15%
Spot change since 2005
revaluation 20.13%
OFFSHORE CNH MARKET
Instrument Current Difference
from onshore
Offshore spot yuan
* 6.895 -0.08%
Offshore
non-deliverable 6.731 2.49%
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 Georgina Lee; Editing by Simon Cameron-Moore)
