SHANGHAI, June 17 (Reuters) - China's yuan weakened on
Thursday to a more-than-three-week low against a broadly
stronger dollar as the U.S. Federal Reserve adopted a more
hawkish outlook.
The dollar rose to its highest level in almost two
months versus major peers after the Fed brought forward its
projections for the first post-pandemic interest rate hikes into
2023, citing an improved health situation and dropping a
long-standing reference that the crisis was weighing on the
economy.
The firmer dollar pressured the yuan's official guidance
rate and spot prices. Prior to market opening, the People's Bank
of China (PBOC) set the midpoint rate at 6.4298 per
dollar, 220 pips or 0.34% weaker than the previous fix of
6.4078, the weakest since May 24.
Several traders and analysts said the official fixing came
in much weaker than their forecasts. Thursday's midpoint was 67
pips weaker than Reuters' estimate of 6.4231.
In the spot market, onshore yuan opened at 6.3977
per dollar and eased to a low of 6.4258, the softest level since
May 24. By midday, it was changing hands at 6.4220, 251 pips
weaker than the previous late session close.
"I think the central bank is comfortable with the cross rate
trading at current levels," said Ken Cheung, chief Asian FX
strategist at Mizuho Bank in Hong Kong, maintaining his view the
yuan would be trading at around 6.45 by the end of the month.
Cheung added that the central bank had warned the market
multiple times of a possible rebound in the dollar and a
corresponding retreat in the yuan.
China FX Market Self-Regulatory Framework said in a
statement late on Wednesday that companies should be on guard
against the risks of yuan depreciation. Factors that may trigger
yuan depreciation include the Fed exiting from its quantitative
easing, and a robust U.S. economic recovery boosting the dollar.
The CFETS index, measuring the yuan's strength
against the currencies of its major trading partners, rose to
98.07 on Thursday, according to Reuters calculations based on
official.
Market participants widely believe the 98-level could act as
the ceiling for the index, which officially publishes on a
weekly and monthly basis. A too high reading could suggest China
might be suffering a trade disadvantage against its peers.
Meanwhile, a trader at a Chinese bank said some corporate
clients converted dollar earnings during the morning to take
advantage of the weaker yuan, whioch helped limit the Chinese
currency's decline.
By midday, the global dollar index fell to 91.397
from the previous close of 91.406, while the offshore yuan
was trading at 6.426 per dollar.
The yuan market at 0400 GMT:
ONSHORE SPOT:
Item Current Previous Change
PBOC midpoint 6.4298 6.4078 -0.34%
Spot yuan 6.422 6.3969 -0.39%
Divergence from -0.12%
midpoint*
Spot change YTD 1.66%
Spot change since 2005 28.88%
revaluation
Key indexes:
Item Current Previous Change
Thomson 98.1 97.88 0.2
Reuters/HKEX
CNH index
Dollar index 91.397 91.406 0.0
*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 6.426 -0.06%
*
Offshore 6.5909 -2.44%
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, Jindong Zhang and Andrew Galbraith;
Editing by Simon Cameron-Moore)
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