China’s yuan was steady against the dollar on Thursday, as volatility in the dollar amid a tightening U.S. presidential election race kept many investors on the sidelines.
Traders said sentiment was muted as global financial markets were on edge before Tuesday’s U.S. vote, with some investors pricing a possible victory for Republican candidate Donald Trump – a political novice.
While Democratic contender Hillary Clinton, seen as the candidate of the status quo, remained ahead in many polls, the Brexit shock over the summer has created caution in markets over an upset win for Trump.
The dollar index, which tracks a basket of six major currencies, traded at 97.119 at midday after dropping as low as 97.178 overnight, its lowest in nearly a month.
The People’s Bank of China set the midpoint rate at 6.7491 per dollar prior to market open, firmer than the previous fix 6.7562.
The spot market opened at 6.7589 per dollar and was changing hands at 6.7590 at midday, a mere 2 pips weaker than the previous late session close and 0.15 percent weaker than the midpoint.
“There is some dollar demand by companies with urgent needs, but market sentiment was low compared with previous days,” said a trader at a Chinese bank in Shanghai.Traders also noted that the impact of the presidential race had overshadowed the U.S. Federal Reserve’s latest review, where policymakers signaled they could hike rates next month, in line with market consensus.
“The upcoming U.S. non-farm payroll data and a potential (December) interest rate hike were all outweighed by the political factors,” the trader added.
The offshore yuan was trading 0.16 percent weaker than the onshore spot at 6.7700 per dollar.Offshore one-year non-deliverable forwards contracts (NDFs), considered the best available proxy for forward-looking market expectations of the yuan’s value, traded at 6.9320, 2.64 percent weaker than the midpoint.
One-year NDFs are settled against the midpoint, not the spot rate.