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SHANGHAI, Jan 13 (Reuters) - China's yuan firmed on
Wednesday after the central bank set a stronger midpoint
guidance and as the greenback weakened.
The dollar nursed losses on Wednesday as a retreat in U.S.
yields sapped momentum from its recent rebound and investors
cautiously resumed bets that it will continue its 2020 slide.
The People's Bank of China set the midpoint rate
at 6.4605 per dollar prior to the market open, 218 pips firmer
than the previous fix of 6.4823.
In the spot market, the yuan opened at 6.4607 and
was changing hands at 6.4561 at midday, 72 pips firmer than the
previous late session close.
Still, traders said the day's midpoint was weaker than
expected, as regulators wanted a reasonable yuan rise to reflect
China's economic fundamentals and dollar weakness.
"The U.S. is actually happy to see the dollar weakness which
could boost its exports, while China is not that willing to see
a too rapid yuan rise which could hurt the country's exports,"
said Wang Jianhui, chief economist at Capital Securities.
"Though China has not intervened much during the recent yuan
rally, as it wants to avoid currency manipulation accusations by
the U.S.," he added.
New bank lending in China fell in December from the previous
month, but lending for all of 2020 hit a record, as the central
bank kept its policy stance accommodative to speed the economy's
recovery from the coronavirus shock early last year.
There was muted reaction to data showing China has recorded
the biggest daily jump in COVID-19 cases in more than five
months. Authorities are moving aggressively to avoid a national
outbreak, with more than 28 million people are under lockdown in
four cities.
The yuan's appreciation has not reached an end despite
rising concerns about exporters' profit erosion, Becky Liu, head
of China macro strategy at Standard Chartered Bank (HK) Limited,
said in a report.
China's economy continues to recover and external
geopolitical risk and uncertainty would likely ease with U.S.
President-elect Joe Biden's inauguration next week, she said.
The Thomson Reuters/HKEX Global CNH index, which
tracks the offshore yuan against a basket of currencies on a
daily basis, stood at 96.01, weaker than the previous day's
96.2.
The global dollar index fell to 89.97 from the
previous close of 90.025.
The offshore yuan was trading at 6.4474 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 6.5817, -1.84 percent away from the midpoint.
One-year NDFs are settled against the midpoint, not the spot
rate.
The yuan market at 4:02AM GMT:
ONSHORE SPOT:
Item Current Previous Change
PBOC midpoint 6.4605 6.4823 0.34%
Spot yuan 6.4561 6.4633 0.11%
Divergence from -0.07%
midpoint*
Spot change YTD 1.12%
Spot change since 2005 28.20%
revaluation
Key indexes:
Item Current Previous Change
Thomson 96.01 96.2 -0.2
Reuters/HKEX
CNH index
Dollar index 89.97 90.025 -0.1
*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 6.4474 0.13%
*
Offshore 6.5817 -1.84%
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 Luoyan Liu, Jindong Zhang and Andrew Galbraith;
Editing by Kim Coghill)
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