(Reuters) – SHANGHAI, July 2 (Reuters) – On Friday, China’s yuan fell to a one-week low versus the dollar, putting it on track for its fifth straight weekly loss, as increased hopes for strong job growth in the United States boosted the greenback.
The release of the nonfarm payrolls report in the United States later in the day could have an impact on the Federal Reserve’s decision to reduce stimulus earlier than planned. The outcome was also predicted to cause considerable currency volatility.
The People’s Bank of China (PBOC) set the midpoint rate at 6.4712 per dollar before the market opened, 3 pips lower than the previous fix of 6.4709.
According to traders and analysts, the official fixing was significantly weaker than the market had expected. It was 36 basis points below than Reuters’ prediction of 6.4676.
The onshore yuan began at 6.4697 per dollar in the spot market, fell to a one-week low of 6.4789, and then traded at 6.4772 at midday, 72 pips away from the previous late session close and 0.09 percent off the midpoint.
If the spot yuan ends the late night session at the noon level, it will have lost 0.34 percent against the dollar this week, marking the sixth consecutive weekly loss.
Despite recent weakening versus the US dollar, the yuan continues to outperform a basket of currencies. According to Reuters estimates based on official data, the CFETS basket index, which measures the yuan’s value versus its major trading partners, rose to 98.21 on Friday.
Markets believe the government want the index to reach 98 as a ceiling, as a higher score might hurt Chinese exports. Several currency traders believe the yuan’s rally versus the basket may be limited as a result of the weaker-than-expected midpoint fixing.
The strong CFETS index, according to Carie Li, an analyst at Wing Hang Bank, indicated that China’s economic fundamentals remained supportive of the yuan.
“With many parts of the world, including many Asian countries, suffering from the epidemic, China’s relative economic edge appears to continue to sustain the yuan’s stability despite a rising dollar,” Li said, predicting the yuan to trade between 6.4 and 6.5 per dollar in the near term.
The global dollar index slipped to 92.559 by lunchtime, down from 92.569 at the previous closing, while the offshore yuan was trading at 6.481 per dollar.
At 4:01 a.m. GMT, the yuan market was as follows:
PBOC midpoint 6.4712 6.4709 0.00 percent ONSHORE SPOT: Item Current Previous Change PBOC midpoint 6.4712 6.4709 0.00 percent
6.4772 yuan 6.47 -0.11 percent Spot yuan 6.4772 yuan 6.47 -0.11 percent
Spot change YTD 0.79 percent, divergence from 0.09 percent midpoint*
Since 2005, there has been a spot change. Revaluation of 27.78 percent
Indexes that are important:
Item Previous Change Previous Item
98.12 98.18 -0.1 Thomson 98.12 98.18 -0.1
Dollar index 92.559 92.569 0.0 Reuters/HKEX CNH index Dollar index 92.559 92.569 0.0
*The exchange rate between the US dollar and the Chinese yuan has diverged. If the figure is negative, it means the spot yuan is trading higher than the midpoint.
The People’s Bank of China (PBOC) allows the official midpoint rate, which it sets each morning, to climb or fall by 2%.
CNH MARKET OFFSHORE
Instrument Current Distinction from the Onshore
Offshore spot yuan 6.481 -0.06% * Offshore 6.6452 -2.62 percent non-deliverable forwards ** Offshore 6.6452 -2.62 percent non-deliverable futures
*Premium for an offshore location over an onshore location **
Since non-deliverable forwards are settled against the midpoint, the figure indicates the discrepancy from the PBOC’s official midpoint.
(Winni Zhou and Andrew Galbraith contributed reporting; Kim Coghill edited the piece.)/n
