1. China’s yuan steady, c.bank strengthens defence ahead of Q2 GDP

China’s yuan steady, c.bank strengthens defence ahead of Q2 GDP

The yuan was little changed against the dollar on Thursday, as China's central bank was suspected of intervening in the market to smoothen strong dollar demand ahead of GDP data this week.

By: | Shanghai | Published: July 14, 2016 10:51 AM
But analysts and financial markets widely expect the yuan to weaken further in coming months, risking a surge in outflows like those seen in 2015 and early this year. (Reuters) Traders reported state-owned banks were offering large dollar liquidity at 6.6880 per dollar on behalf of the central bank to offset heavy dollar demand from clients.(Reuters)

The yuan was little changed against the dollar on Thursday, as China’s central bank was suspected of intervening in the market to smoothen strong dollar demand ahead of GDP data this week.

The government is due to release economic growth data for the second quarter on Friday, which could add pressure on the yuan, after June trade figures on Wednesday missed expectations.

The People’s Bank of China set the midpoint rate at 6.6846 per dollar prior to market open, 0.07 percent firmer than the previous fix 6.6891. The spot yuan opened at 6.6890 per dollar and was changing hands at 6.6880 at midday, flat from the previous close.

Traders reported state-owned banks were offering large dollar liquidity at 6.6880 per dollar on behalf of the central bank to offset heavy dollar demand from clients.

“The central bank has stepped up its defence recently, given that client dollar demand has risen,” said a trader at a Chinese commercial bank in Shanghai.

“More and more people are talking about yuan depreciation these days and the central bank decided it’s time for some deterrence.”

The Chinese currency hovered not far from its 5-1/2-year low hit on Wednesday last week and has fallen almost 3 percent against the dollar so far this year.

China’s economic growth likely cooled to a fresh seven-year low of 6.6 percent in the second quarter as the industrial sector loses steam and a boost from financial services fades, according to a Reuters poll of 61 economists.

“Given that the economic fundamentals haven’t changed much, I doubt the data would have much of an impact on the forex market,” said a trader at another Chinese commercial bank in Shanghai.

China’s exports fell more than expected in June as global demand remained stubbornly weak and as Britain’s decision to leave the European Union clouds the outlook for one of Beijing’s biggest markets.

Traders said the worse-than-expected trade data had no impact on the yuan. The offshore yuan was trading 0.09 percent softer than the onshore spot at 6.6938 per dollar.

The yuan market at a glance:

ONSHORE: Item Current Previous Change PBOC midpoint 6.6846 6.6891 0.07% Spot yuan 6.688 6.6882 0.00% Divergence from 0.05% midpoint* Spot change YTD -2.91% Spot change since 2005 23.75% revaluation *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 6.6938 -0.09% * Offshore 6.8465 -2.36% 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. .

  1. No Comments.

Go to Top