SHANGHAI, May 12 (Reuters) - The yuan eased on Wednesday as
overseas-listed Chinese firms bought dollars to make dividend
payments, but trade was cautious ahead of U.S. inflation data
which has raised concerns in equity mrkets about earlier
interest rate hikes.
The dollar continued to hover near its lowest levels of the
year, however, suggesting most investors are hanging on to bets
that the U.S. Federal Reserve would maintain its ultra-easy
policy settings for a prolonged period despite an expected
pickup in U.S. inflation data later in the day.
Prior to the market opening, the People's Bank of China
(PBOC) set the midpoint rate at 6.4258 per dollar, 4
pips weaker than the previous fix of 6.4254.
The official daily guidance rates largely matched market
forecasts or came in slightly weaker-than-expected earlier this
week. But Wednesday's fixing was much firmer than Reuters'
forecast and was barely changed from the previous day's fix. The
official guidance was 48 pips stronger than Reuters' prediction
of 6.4306.
In the spot market, onshore yuan opened at 6.4283
per dollar and was changing hands at 6.4406 at midday, 123 pips
weaker than the previous late session close.
Traders said some expectations that the yuan could
strengthen past the 6.40 per dollar level were receding after
several attempts failed earlier this week, and some exporters'
dollar selling interest to avoid exchange rate loss ebbed.
Instead, corporate clients' demand for the greenback started
to pick up as some took advantage of the recent cheaper dollar.
Overseas-listed Chinese companies usually have to make their
interim dividend payments between May and August, and such
seasonal FX purchases could pile downward pressure on the yuan.
Standard Chartered had expected total dividend payments would
reach $84 billion this year.
Separately, some investors were relieved after the PBOC
appeared to reaffirm that it will keep policy steady and guide
real lending rates lower, despite a sharp jump in producer
inflation.
"The PBOC's Q1 monetary policy report suggests that the
central bank is not worried about imported inflation, despite
that it expects PPI to rise further in Q2 and Q3," said Frances
Cheung, rates strategist at OCBC Bank in Singapore.
"This may be taken as a reassurance that there is no U-turn
in monetary policy. We believe liquidity will stay supportive
and front-end rates anchored," she said.
The global dollar index stood at 90.398 as of midday,
when the offshore yuan was trading at 6.4385 per
dollar.
The yuan market at 0400 GMT:
ONSHORE SPOT:
Item Current Previous Change
PBOC midpoint 6.4258 6.4254 -0.01%
Spot yuan 6.4406 6.4283 -0.19%
Divergence from 0.23%
midpoint*
Spot change YTD 1.36%
Spot change since 2005 28.51%
revaluation
Key indexes:
Item Current Previous Change
Thomson 97.34 97.36 0.0
Reuters/HKEX
CNH index
Dollar index 90.398 90.211 0.2
*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 6.4385 0.03%
*
Offshore 6.6039 -2.70%
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 Winni Zhou and Andrew Galbraith; Editing by Kim
Coghill)
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