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China's yuan softer on dollar buying, but more appreciation expected

    SHANGHAI, Nov 19 (Reuters) - China's yuan dipped on
Thursday, pulling back from near 29-month highs on dollar
buying, but analysts and traders said they expected the
currency's appreciation to resume as rising expectations for
easing weigh on the greenback.
    The softer yuan came despite a stronger fixing by the
central bank. Before the market open, the People's Bank of China
set the midpoint rate of the yuan's daily trading band
 at 6.5484 per dollar, its firmest level since June
26, 2018. 
    The yuan's domestic trading session close, used to calculate
the daily fixing, was 6.5425 per dollar on Wednesday, its
strongest level since June 25, 2018.
    Spot yuan opened at 6.5640 per dollar and was
changing hands at 6.5667 at midday, 77 pips weaker than
Wednesday's late session close.
    A trader at a foreign bank said that the strong yuan had
prompted dollar buyers to enter the market. 
    "But with the continued development of the pandemic, and
with vaccines not coming so quickly, non-U.S. currencies
including the yuan are performing well," he said.
    With possible additional Fed easing driving dollar weakness,
the market will be watching the development of novel coronavirus
vaccines, the trader added. 
    The global dollar index stood at 92.485 on Thursday,
up slightly from Wednesday's close of 92.474. 
    A surge in novel coronavirus infections in the United States
could slow growth, and the U.S. central bank will use all of its
tools to bring the economy back to "full strength", New York
Federal Reserve Bank President John Williams said Wednesday.

    The U.S. death toll from COVID-19 passed 250,000 and
COVID-19 hospitalisations hit a new high on Wednesday as a rise
in cases prompted fresh lockdown measures throughout the
country.
    The offshore yuan was little changed at 6.5628 per
dollar from a close of 6.5629 on Wednesday.
    "Current levels present a no-man's land in the near term for
this pair," said Terence Wu, a strategist at OCBC in Singapore.
"With the USD soggy, a long USD-CNH would be hard to justify."
    
    The yuan market at 4:05AM GMT: 
    
    ONSHORE SPOT:
 Item               Current  Previous  Change
 PBOC midpoint      6.5484   6.5593    0.17%
                                       
 Spot yuan          6.5667   6.559     -0.12%
                                       
 Divergence from    0.28%              
 midpoint*                             
 Spot change YTD                       6.04%
 Spot change since 2005                26.04%
 revaluation                           
 
    Key indexes:
     
 Item            Current     Previous  Change
                                       
 Thomson         95.96       96.09     -0.1
 Reuters/HKEX                          
 CNH index                             
 Dollar index    92.485      92.474    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    6.5628    0.06%
        *                        
 Offshore              6.7473    -2.95%
 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 and Jindong Zhang; Editing by
Stephen Coates)
  
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