Saturday, October 16

China’s yuan off near 1-month high on worries over elevated basket index

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SHANGHAI — China’s yuan on Tuesday eased

from a near one-month high against the dollar hit a day earlier,

as the currency’s strength against those of its major trading

partners raised investor concern of a dampening effect on


Still, the yuan slipped relatively less than its peers

against a rising dollar, which currency traders said reflected

recent positive developments in Sino-US relations.

Persistent strength in the yuan against a basket of

currencies has unsettled some market participants who


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have held back from testing new highs, traders said. The market

will pay close attention to trade data due on Wednesday for any

signs a stronger yuan has had an impact on China’s exports.

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

(PBOC) set the midpoint rate at 6.4447 per dollar, 32

pips or 0.05% firmer than the previous fix of 6.4479, the

strongest since Sept. 16.

The firmer official guidance pushed China’s trade-weighted

yuan basket index to a fresh more than 5-1/2-year

high of 100.26, up 5.71% so far this year, according to Reuters’

calculations based on official data.

In the spot market, onshore yuan opened at 6.4602

per dollar and was changing hands at 6.4530 at midday, 17 pips

weaker than the previous late session close.


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The spot price touched a high of 6.4340 per dollar on

Monday, the strongest since Sept. 16.

Apart from the strong basket index, “markets were also

cautious about the timing of US Federal Reserve’s policy

tapering, as such tightening could boost the dollar and reverse

the yuan’s strengthening trend,” said a trader at a Chinese


Separately, markets were waiting on whether the PBOC would

take any policy action when rolling over a batch of 500 billion

yuan ($77.5 billion) worth of medium-term loans due on Friday.

“At first glance, it appears that the PBOC reserves plenty

of policy room for easing while the Fed has to pull the trigger

on the tapering soon and bring forward its rate hike timing to

curb inflation,” said Ken Cheung, chief Asian FX strategist at


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Mizuho Bank in Hong Kong.

“Yet, the surging China PPI suggested that the PBOC might

not have such ample policy leeway to deliver an aggressive rate


Elsewhere, some signs of liquidity tightness emerged in Hong

Kong, with the offshore yuan’s overnight CNH HIBOR

rising to 4.425%, the highest since Aug. 31.

Some traders and market analysts said such tightness came as

banks in Hong Kong scrambled for short-term liquidity before a

possible local market closure due to a typhoon.

By midday, the global dollar index stood at 94.337,

while the offshore yuan was trading at 6.455 per


The yuan market at 0401 GMT:


Item Current Previous Change

PBOC midpoint 6.4447 6.4479 0.05%

Spot yuan 6.453 6.4513 -0.03%


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Divergence from 0.13%


Spot change YTD 1.17%

Spot change since 2005 28.26%


Key indexes:

Item Current Previous Change

Thomson 100.06 100.22 -0.2


CNH index

Dollar index 94.337 94.375 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



Instrument Current Difference

from onshore

Offshore spot yuan 6.455 -0.03%


Offshore 6.642 -2.97%




*Premium for offshore spot over onshore

**Figure reflects difference from PBOC’s official midpoint,

since non-deliverable forwards are settled against the midpoint.


($1 = 6.4526 Chinese yuan)

(Reporting by Winni Zhou and Andrew Galbraith; editing by

Richard Pullin)



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