In the spot market, the onshore yuan opened at 6.9570 per dollar and eased to a low of 6.9663 at one point, the weakest level since March 10. By midday, it was changing hands at 6.9625, 40 pips weaker than the previous late session close. "Resistance at 6.9790 is now eyed before the key 7.00-figure," Maybank analysts said in a note. Yuan softness also reflects data that highlights weaknesses in China's economic recovery, traders said. They added that queries from exporters interested in offloading dollar positions had increased after the yuan weakened past 6.95 per dollar last week but also said many clients were still waiting for further yuan weakness before doing so.
"The RMB is still suppressed by exporters' muted FX conversion due to the RMB's negative carry versus the USD, and a still low conviction in onshore equities' performance," analysts at HSBC said in a note.
"Moreover, concerns over a rebound of services deficit as well as the upcoming dividend season from June to August may also lead to more USD demand." Overseas-listed Chinese companies usually buy more dollars in the summer when they pay dividends to overseas shareholders - a factor that puts pressure on the yuan. HSBC revised down its yuan forecasts. It now expects the currency to trade at 6.9 per dollar at the end of the second quarter, 6.85 at the end of the third quarter and 6.8 at the end of the year. That compares with earlier predictions of 6.75, 6.65 and 6.5 respectively. By midday, the global dollar index stood at 102.657, while the offshore yuan was trading at 6.972 per dollar.
The yuan market at 0327 GMT:
ONSHORE SPOT:
Item Current Previous Change
PBOC midpoint 6.9654 6.9481 -0.25% Spot yuan 6.9625 6.9585 -0.06% Divergence from -0.04%
midpoint*
Spot change YTD -0.90%
Spot change since 2005 18.87%
revaluation
Key indexes:
Item Current Previous Change
Thomson 0.0
Reuters/HKEX
CNH index
Dollar index 102.657 102.681 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 6.972 -0.14%
*
Offshore 6.8038 2.38%
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 Edwina
Gibbs)
