May 23, 2019 / 5:16 AM / 2 months ago

Yuan eases on tech crossfire, firm fixing caps losses

    By Noah Sin
    HONG KONG, May 23 (Reuters) - The yuan weakened on Thursday
as the Sino-U.S. dispute over trade spilled into the technology
sector, but the Chinese central bank's firm fixing kept losses
in check.
    Reuters reported late on Wednesday the U.S. government was
considering Huawei-like sanctions on Chinese video surveillance
firm Hikvision over China's treatment of its Uighur
Muslim minority, complicating the protracted trade war between
the world's two largest economies.
    Washington placed Chinese telecoms giant Huawei Technologies
         on a trade blacklist last week, and is reportedly
pressing South Korea to drop using Huawei's equipment, citing
security concerns.
    The yuan softened, but only mildly, in the wake of these
U.S. moves. The spot market changed hands at 6.9139
at midday, 71 pips weaker than the previous late session close
and 0.21 percent weaker than the midpoint.
    Traders said the People's Bank of China's
stronger-than-expected midpoint kept the yuan's fall in check.
Spot yuan can trade 2 percent either side of the fixing.
    The PBOC set the midpoint rate at 6.8994 per
dollar prior to market open, a touch weaker than the previous
fix of 6.8992, but still stronger than the Reuters' estimate of
6.901 per dollar and traders'
expectations.
    "(PBOC) has been keeping (USDCNY fixing) artificially low,
to persuade people from trying (to short the yuan)," said a Hong
Kong-based head of forex trading at an international bank.
    Central bank jawboning has helped stem downward pressure on
the yuan, said a second trader, based in Shanghai. "The renminbi
has been relatively stable recently because officials have been
outspoken," he said.
    Pan Gongsheng, deputy governor of the PBOC, said China will
keep the yuan exchange rate within a reasonable and balanced
range earlier this week, after Reuters reported that the central
bank is keen to keep the currency from hitting the widely
watched 7 per dollar handle.
    The scheduled meeeting between U.S. President Donald Trump
and Chinese President Xi Jinping at the G20 in Japan in
late-June is also capping downward pressure on the yuan, leaving
it in a tight range, said Carie Li, an economist at OCBC Wing
Hang.
    "People still have hopes for the G20 meeting. You can't rule
out, at this point, that the two sides will not agree to
something there," she said.
    The next round of U.S. tariffs on Chinese goods could come
around the time of the meeting, according to remarks by U.S.
Treasury Secretary Steven Mnuchin on Wednesday.
    The offshore yuan was trading 0.29 percent weaker
than the onshore rate at 6.9337 per dollar. The global dollar
index rose to 98.134 from the previous close of 98.041.

    The yuan market at 0400 GMT: 
    
    ONSHORE SPOT:
 Item               Current  Previous  Change
 PBOC midpoint      6.8994   6.8992    0.00%
                                       
 Spot yuan          6.9139   6.9068    -0.10%
                                       
 Divergence from    0.21%              
 midpoint*                             
 Spot change YTD                       -0.59%
 Spot change since 2005                19.71%
 revaluation                           
 
    Key indexes:
     
 Item            Current     Previous  Change
                                       
 Thomson         93.84       93.85     0.0
 Reuters/HKEX                          
 CNH index                             
 Dollar index    98.134      98.041    0.1
 
    
*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 percent from official midpoint rate it sets each
morning.

    OFFSHORE CNH MARKET   
  
 Instrument            Current   Difference
                                 from onshore
 Offshore spot yuan    6.9337    -0.29%
        *                        
 Offshore              6.972     -1.04%
 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.
. 


 (Editing by Jacqueline Wong)
  
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