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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
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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
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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
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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)
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