Chinese yuan to six-week low as rate outlook pushes dollar up
SHANGHAI, June 21 (Reuters) – The Chinese yuan fell to its lowest level in more than six weeks against a vastly stronger dollar on Monday after the People’s Bank of China set its daily median rate at its lowest level in more than five weeks.
The dollar closed strong last week after the US Federal Reserve signaled the earlier than expected end of its ultra-relaxed monetary policy.
In contrast, the People’s Bank of China has repeatedly stated that it will not make any sudden policy changes, and on Monday, the benchmark rate for business and household loans remained unchanged for the 14th consecutive month when it was set in June.
“The logic of the dollar index‘s short-term optimism holds true. It may stabilize and then continue to rise,” said a trader at a Chinese bank.
But he added that the exporters’ demand would support the yuan, which could maintain its strength against a basket of currencies.
As of Friday, the China’s Foreign Exchange Trading System (CFETS) yuan basket was at 98.19, its highest level since March 2016.
The People’s Bank of China set the median rate on Monday CNY = PBOC at 6.4546 per dollar before the market opened, its lowest level since May 13.
Yuan spot onshore CNY = CFXS opened stronger at 6.4520 per dollar but reversed course to hit its weakest point since May 6 at 6.4717 per dollar. By noon it was changing hands at 6.4671, 134 pips below Friday’s end of session close.
The offshore yuan CNH = D3 weakened to 6.4792 to the dollar, from a close of 6.4631 on Friday.
Ken Cheung, chief Asian currency strategist at Mizuho Bank, said China’s policy response to the pandemic continues to support the country’s currency with ever higher yields on yuan assets and a gradual opening. of China’s capital account.
âSince the outbreak of the pandemic, the PBoC has refrained from reducing its policy rate to zero and has managed to retain its conventional monetary leeway,â he said, adding that an earlier-than-expected reduction the Fed likely would not erode the yuan’s yield advantage in the near term. term.
The Thomson Reuters / HKEX Global CNH Index .RXYH, which tracks the offshore yuan daily against a basket of currencies, stood at 97.83, lower than the previous day’s 97.99.
The global dollar index = USD rose to 92.284 from the previous close of 92.262.
The yuan market at 4:15 GMT:
PLACE ON LAND:
Midpoint of PBOC CNY = SAEC
Yuan spot CNY = CFXS
Divergence from midpoint *
YTD spot change
Spot change since 2005 revaluation
Thomson Reuters / HKEX CNH Index
* Divergence in dollar / yuan exchange rate. A negative number indicates that the 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 the official median rate it sets each morning.
CNH OFFSHORE MARKET
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