"Chinese exporters have been hoarding dollar receivables,"
Barclays analysts said in a note published last week.
"We see 6.95 as first resistance level for USD/CNY, as
exporters could sell dollar holdings at these levels."
Prior to market opening, the People's Bank of China (PBOC)
set the midpoint rate at a two-month low of 6.9481
per dollar, 380 pips or 0.55% weaker than the previous fix of
6.9101.
In the spot market, the onshore yuan opened at
6.9512 per dollar and weakened to a low of 6.9518 at one point,
the softest level since March 10. By midday, it was changing
hands at 6.9479, 16 pips firmer than the previous late session
close.
If the yuan finishes the late night session at the midday
level, it would have lost 0.6% against the dollar for the week,
the biggest weekly drop since late February.
"Unless a higher USD/CNY reaches an inflection point,
creating a self-fulfilling vicious cycle of higher USD/CNY and
subsequent capital outflows, intervention in the FX market is
likely to be limited at this stage," Kiyong Seong, lead Asia
macro strategist at Societe Generale said in a note.
With "big four" state-owned banks being told to reduce the
ceiling on interest rates they pay on some deposits, traders
said investors would pay close attention to the central bank's
medium-term policy loan rollover on Monday to gauge the official
stance on monetary policy.
"China reopening remains disappointing and so we expect
further stimulus in coming months," said Win Thin, global head
of currency strategy at Brown Brothers Harriman.
"So far, the measures taken have had little impact on the
economy."
By midday, the global dollar index rose to 102.093 from the previous close of 102.058, while the offshore yuan was trading at 6.954 per dollar.
The one-year forward value for the offshore yuan traded at 6.7841 per dollar, indicating a 2.50% appreciation within 12 months. The yuan market at 0317 GMT:
ONSHORE SPOT:
Item Current Previous Change
PBOC midpoint 6.9481 6.9101 -0.55% Spot yuan 6.9479 6.9495 0.02% Divergence from 0.00%
midpoint*
Spot change YTD -0.69%
Spot change since 2005 19.12%
revaluation
Key indexes:
Item Current Previous Change
Dollar index 102.093 102.058 0.0
*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 6.954 -0.09%
*
Offshore 6.7882 2.36%
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; Editing by Simon
Cameron-Moore)
