SHANGHAI, April 29 (Reuters) - China's yuan strengthened on
Thursday to its firmest in nearly two months after the dollar
slid to nine-week lows following a dovish outlook from the
Federal Reserve and as the U.S. president outlined a fresh $1.8
trillion stimulus plan.
President Joe Biden proposed his sweeping new plan in a
speech to a joint session of Congress on Wednesday, including $1
trillion in spending on education and healthcare over 10 years
and $800 billion in tax credits aimed at low- and middle-income
families.
Biden's speech came after Fed Chairman Jerome Powell said on
Wednesday that "it is not time yet" to begin discussing any
change in policy after the U.S. central bank left interest rates
and its bond-buying programme unchanged.
"The impact from the Fed overnight is still very clear, the
U.S. dollar index's downward trend is extending and the yuan
should rise," said a trader at a Chinese bank.
But in an indication that Sino-U.S. tensions that have
buffetted the yuan are far from over, Biden's speech took aim at
China, pledging to maintain a strong U.S. military presence in
the Indo-Pacific and promising to boost technological
development and trade.
A trader at a foreign bank said that China's currency would
continue to follow the dollar's moves, and that the yuan still
faced resistance at its January peak.
Before the market open, the People's Bank of China set the
yuan's daily midpoint at 6.4715 per dollar, its
firmest since March 3.
Guided by the higher fixing, spot yuan opened at
6.4745 per dollar and firmed to 6.4641, its strongest since
March 3, before moderating to trade at 6.4716 by midday. That
was 73 pips stronger than Wednesday's late session close.
The offshore yuan firmed to 6.4625 per dollar, also
its strongest level since March 3. By midday it had retreated to
6.4671 per dollar, still 86 pips stronger on the day.
The global dollar index stood at 90.588, up from the
previous close of 90.532 but near late-February lows.
"China's solid macroeconomic fundamentals should continue to
provide support for the currency," Matthew Ryan, senior market
analyst at Ebury, said in a note.
"We are seeing a progressive internationalisation of the
yuan, whereby it continues to account for a growing share of the
world's trade and foreign exchange reserve assets, with CNY used
increasingly for invoicing and payments. The latter still
accounts for much less than China's weight in global trade,
suggesting room for growth and additional demand for the
currency."
The yuan market at 4:16AM GMT:
ONSHORE SPOT:
Item Current Previous Change
PBOC midpoint 6.4715 6.4853 0.21%
Spot yuan 6.4716 6.4789 0.11%
Divergence from 0.00%
midpoint*
Spot change YTD 0.88%
Spot change since 2005 27.89%
revaluation
Key indexes:
Item Current Previous Change
Thomson 96.71 96.77 -0.1
Reuters/HKEX
CNH index
Dollar index 90.588 90.532 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 6.4671 0.07%
*
Offshore 6.641 -2.55%
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 Andrew Galbraith; Additional reporting by Jindong
Zhang; Editing by Jacqueline Wong)
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