Tuesday, September 21

China’s yuan weakens on COVID-19 outbreaks in Fujian, disappointing data


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SHANGHAI — The yuan eased against the

dollar on Wednesday, as outbreaks of coronavirus Delta variant

infections raised concerns over China’s economic recovery.

The southeastern province of Fujian reported its fifth

straight day of new local COVID-19 infections, though they were

confined to three coastal cities where a total of 152 cases had

been reported between Sept. 10-14.

Some analysts reckoned China’s tough measures to eradicate

the virus, rather than try to adapt to living with it, as many

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other countries are doing, could handicap the economy.

“We reckon that China’s zero-Covid strategy could be

increasingly costly for the Chinese economy,” said Lu Ting,

chief China economist at Nomura.

August activity indicators came in weaker than expected,

with industrial output rising at the weakest pace since July

2020, while growth of retail sales also slowed significantly.

Marco Sun, chief financial markets analyst at MUFG Bank,

also noted three high frequency indicators including bank

lending, power generation and rail freight transportation all

slowed in August, suggesting that the economy’s recovery in the

second half of this year was “facing multiple obstacles.”

The onshore spot yuan opened at 6.4430 per dollar

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and was changing hands at 6.4421 at midday, 39 pips softer than

the previous late session close.

Separately, China’s central bank rolled over maturing

medium-term loans earlier in the session, while keeping the

interest rate unchanged for the 17th month in a row.

“The full rollover of the MLF provided by the PBOC this

morning suggests that some liquidity support is assured but

credit growth is strong enough for some ammunition to be kept

for the later months,” analysts at Maybank said in a note.

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

set the midpoint rate at 6.4492 per dollar, 8 pips

firmer than the previous fix of 6.4500, the strongest since June

18.

By midday, the global dollar index fell to 92.637

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from the previous close of 92.672, while the offshore yuan

was trading at 6.439 per dollar.

The yuan market at 0406 GMT:

ONSHORE SPOT:

Item Current Previous Change

PBOC midpoint 6.4492 6.45 0.01%

Spot yuan 6.4421 6.4382 -0.06%

Divergence from -0.11%

midpoint*

Spot change YTD 1.34%

Spot change since 2005 28.48%

revaluation

Key indexes:

Item Current Previous Change

Thomson 99.1 99.05 0.1

Reuters/HKEX

CNH index

Dollar index 92.637 92.672 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 6.439 0.05%

*

Offshore 6.6183 -2.56%

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 Andrew Galbraith; Editing by Simon

Cameron-Moore)

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