Thursday, March 28

China’s yuan eases on COVID worries ahead of policy meetings


Article content

SHANGHAI — China’s yuan eased against the

dollar on Monday, as COVID-19 cases in the country’s commercial

hub continued to weigh on sentiment ahead of key policy meetings

at home and abroad.

Investors remain jittery about possible broad disruptions to

economic activity after Shanghai ordered residents across nine

of the city’s districts and some smaller areas to do COVID-19

tests during July 26-28, due to sporadic cases.

“On the prospect of worsening sentiment due to the lingering

Advertisement 2

Article content

COVID situation in China and uncertainty surrounding China’s

property sector, the yuan will likely remain under pressure in

the near term,” said Li Lin, head of global markets research for

Asia at MUFG Bank.

Li was referring to a recent mortgage boycott, which was

prompted by a growing number of homebuyers who refused to make

payments on their loans for unfinished apartments across the

country.

Prior to market opening, the People’s Bank of China (PBOC)

set the midpoint rate at 6.7543 per dollar, 21 pips

weaker than the previous fix 6.7522.

In the spot market, the onshore yuan opened at

6.7554 per dollar and was changing hands at 6.7560 at midday, 42

pips weaker than the previous late session close.

Traders said the yuan was likely to face downside pressure

Advertisement 3

Article content

this week as the dollar may stay strong in the run-up to the

Federal Reserve’s policy meeting on July 26-27, when it is

expected to raise interest rates by another 75 basis points.

Separately, in China, a Politburo meeting this week is also

in focus, where a top decision-making body will gather to

discuss economic policies for the rest of the year.

“We do not think Beijing will launch an all-out campaign to

meet the annual growth target of ‘around 5.5%’, which is clearly

out of reach now,” said Lu Ting, chief China economist at

Nomura.

“The focus of policymakers has now shifted to fiscal policy

and the property sector since the reserve requirement ratio

(RRR) cut in April, and this shift will likely continue in H2.”

By midday, the global dollar index fell to 106.632

Advertisement 4

Article content

from the previous close of 106.73, while the offshore yuan

was trading at 6.759 per dollar.

The yuan market at 0401 GMT:

ONSHORE SPOT:

Item Current Previous Change

PBOC midpoint 6.7543 6.7522 -0.03%

Spot yuan 6.756 6.7518 -0.06%

Divergence from 0.03%

midpoint*

Spot change YTD -5.94%

Spot change since 2005 22.51%

revaluation

Key indexes:

Item Current Previous Change

Thomson 0.0

Reuters/HKEX

CNH index

Dollar index 106.632 106.73 -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 percent from official midpoint rate it sets each

morning.

OFFSHORE CNH MARKET

Instrument Current Difference

from onshore

Offshore spot yuan 6.759 -0.04%

*

Offshore 6.7125 0.62%

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 David Stanway; Editing by

Jacqueline Wong)

Advertisement

Comments

Postmedia is committed to maintaining a lively but civil forum for discussion and encourage all readers to share their views on our articles. Comments may take up to an hour for moderation before appearing on the site. We ask you to keep your comments relevant and respectful. We have enabled email notifications—you will now receive an email if you receive a reply to your comment, there is an update to a comment thread you follow or if a user you follow comments. Visit our Community Guidelines for more information and details on how to adjust your email settings.



financialpost.com