SHANGHAI/SINGAPORE, May 16 (Reuters) - China's yuan
eased against the dollar on Tuesday, as disappointing retail and
factory output data added to signs the economic recovery was
losing steam, hitting investor sentiment.
Activity indicators for April undershot expectations, adding
pressure to policymakers to shore up a wobbly post-COVID
recovery, even as interest rates rise elsewhere.
Prior to the market opening, the People's Bank of China
(PBOC) set the midpoint rate at 6.9506 per dollar,
148 pips firmer than the previous fix of 6.9654.
In the spot market, the onshore yuan opened at
6.9535 per dollar and was changing hands at 6.9582 at midday, 62
pips weaker than the previous late session close.
The offshore yuan also weakened and was trading at
6.9676 per dollar.
"We see this USD/CNH move up as a reflection of some
disappointment over China's data releases recently that suggests
weak domestic demand still," Maybank analysts said in a note.
Beyond the downbeat domestic data, market focus is also on a
possible U.S. default as a standoff between Democrats and
Republicans over raising the debt ceiling showed few signs of
being resolved. Any updates on debt ceiling talks could affect prices of
U.S. dollar-denominated assets and other major currencies,
including the yuan, traders said.
Separately, China's central bank said on Monday it would
keep liquidity reasonably ample and interest rates appropriate
with a focus on supporting domestic demand.
"The statement of 'keeping monetary and credit aggregates at
a reasonable total amount' opens the door to more liquidity
support by the PBOC in our view," analysts at Goldman Sachs said
in a note.
"We expect a 25-basis-point broad reserve requirement ratio
(RRR) cut in June when liquidity demand picks up at quarter-end
to boost market sentiment and facilitate overall credit growth."
They added that the central bank may prefer adjusting the
RRR to limit the impact on the yuan.
With yield differentials between China and the United
States remaining wide, overseas investors are reluctant to
purchase Chinese bonds, with data showing foreigners sold a net
41.7 billion yuan worth of interbank yuan debt in April.
By midday, the global dollar index fell to 102.374
from the previous close of 102.434.
The one-year forward value for the offshore yuan traded at 6.7931 per dollar, indicating a 2.57% appreciation
within 12 months.
The yuan market at 0357 GMT:
ONSHORE SPOT:
Item Current Previous Change
PBOC midpoint 6.9506 6.9654 0.21% Spot yuan 6.9582 6.952 -0.09% Divergence from 0.11%
midpoint*
Spot change YTD -0.84%
Spot change since 2005 18.95%
revaluation
Key indexes:
Item Current Previous Change
Dollar index 102.374 102.434 -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 6.9676 -0.13%
*
Offshore 6.7948 2.29%
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 Sam
Holmes)
Messaging: winni.zhou.thomsonreuters.com@reuters.net))
