SHANGHAI, China, 6 July (Reuters) – On Tuesday, China’s yuan edged higher versus the dollar, despite investors waiting for minutes from the Federal Reserve’s most recent policy meeting and China’s June inflation statistics before betting on the currency’s direction.
Traders said the two events could cause some volatility in yuan trading, with the Fed minutes due on Wednesday providing more details on policymakers’ thinking on when to reduce stimulus, and China’s consumer inflation data due on Friday influencing the People’s Bank of China’s stance on tightening monetary policy.
Prior to the start of the market, the PBOC fixed the midpoint rate at 6.4613 per dollar, up 82 basis points (0.13 percent) from the previous fix of 6.4695.
Onshore yuan began at 6.4619 per dollar in the spot market and was trading at 6.4617 at midday, 22 pips higher than the previous late session finish.
The yuan was trading in the “middle of a multi-session range between 6.44 and 6.49 per dollar,” according to OCBC Bank strategists.
“Preferred buys are declines towards range lows at 6.4400/500,” they wrote in a note.
Meanwhile, according to some analysts, both government and private polls conducted in June indicated that the services sector was still growing, although at a slower pace.
In a note, Song Shanshan, HSBC’s Greater China economist, stated, “The decreasing price increase in the services industry once again shows the subdued transmission of PPI to service CPI, suggesting that our projection of limited CPI inflationary pressures continues on track.”
Song believes the PBOC will not rush to tighten, and that the lending benchmark rate would remain steady until the end of next year.
The global dollar index slipped to 92.142 by lunchtime, down from 92.247 at the previous closing, while the offshore yuan was trading at 6.4633 per dollar.
At 0407 GMT, the yuan market was as follows:
ITEM CURRENT PREVIOUS CHANGE PBOC MIDPOINT ONSHORE SPOT 6.4613 0.13 percent 6.4695 0.13 percent
6.4617 6.4639 0.03 percent on the spot yuan
Spot change YTD 1.03 percent, divergence from 0.01 percent midpoint*
Since 2005, there has been a spot change. Revaluation of 28.09 percent
Indexes that are important:
Item Previous Change Previous Item
98.03 98.13 -0.1 Thomson Thomson Thomson Thomson Thomson Thomson Thomson Thomson Thomson Thomson Thomson Thomson Thomson Thomson Thomson Thomson Thomson Thomson Thomson Thomson
Dollar index 92.142 92.247 -0.1 Reuters/HKEX CNH index Dollar index 92.142 92.247 -0.1
*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 6.4633 -0.02 percent * Offshore 6.6295 -2.54 percent non-deliverable forwards ** Offshore 6.6295 -2.54 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; Simon Cameron-Moore edited the piece.)/n
