May 21, 2020 / 5:52 AM / 11 days ago

Yuan softens on trade threats, focus turns to parliamentary meeting

    HONG KONG, May 21 (Reuters) - The yuan eased on Thursday as
heightened Sino-U.S. tensions showed no signs of abating, but
expectations of China maintaining exchange rate stability during
its annual parliamentary meeting kept the downward pressure in
check.
    The onshore yuan weakened 0.17% to 7.1054 per
dollar at midday, while the offshore yuan fell 0.14% to
7.1160 per dollar. The dollar index climbed 0.17% to rose
to 99.345 from the previous close.    
    Relations between Washington and Beijing have turned sour in
recent weeks over the corornavirus pandemic and the squabble is
threatening to fire up trade tensions once again.
    U.S. Secretary of State Mike Pompeo called the $2 billion
Beijing pledged to fight the virus "paltry" compared to the cost
on the world from the spread of the COVID-19 illness, the Senate
passed a bill that could de-list Chinese companies on U.S.
exchanges, and regulators have paved the way to tighten the
global chip sales curb to Huawei
Technologies.
    Offsetting the negative headlines was the National People's
Congress (NPC),set to start on Friday, where Premier Li Keqiang
is expected to make a state-of-the-nation style address and
reiterate Beijing's long standing vow to keep the yuan stable.

    China is expected to unveil stimulus measures to spur its
economy battered by the novel coronavirus, as it grapples with
problems from surging unemployment to worsening U.S. ties.
    "The NPC is a temporary stabiliser for the yuan and Chinese
financial markets," said Christy Tan, head of markets strategy
for Asia at National Australia Bank. "But you're looking at
tensions potentially developing into another round of trade
war...which makes for volatile yuan and markets after the NPC."
    Analysts will also be watching the NPC session for clues on
the health of the economy, and if there will be an annual growth
target after GDP contracted in the first quarter for the first
time in decades.
    Li is expected to announce a growth target substantially
lower than the around 6% originally set.
    The People's Bank of China set the midpoint rate
at 7.0868 per dollar prior to market open, firmer than the
Reuters estimate of 7.0924.
    Two traders in Shanghai said with the meeting soon in
session, and the safe haven U.S. dollar supported by
deteriorating risk appetite near its current level, the yuan
will also stay steady near its current range.
    "Trump can rail at the moon and stars when it comes to
China," Cliff Tan, East Asian head of global markets research at
MUFG Bank, wrote in a note on Thursday. 
    "But unless he is prepared to do something concrete (like
abandon the trade deal or fire on Chinese missiles from the
Taiwan Strait) in the final months of his first term, it may not
have a lasting effect on the currency."
    The Thomson Reuters/HKEX Global CNH index, which
tracks the offshore yuan against a basket of currencies on a
daily basis, stood at 92.82, weaker than the previous day's
92.83. 

    The yuan market at 0406 GMT: 
    
    ONSHORE SPOT:
 Item               Current  Previous  Change
 PBOC midpoint      7.0868   7.0956    0.12%
                                       
 Spot yuan          7.1054   7.093     -0.17%
                                       
 Divergence from    0.26%              
 midpoint*                             
 Spot change YTD                       -2.00%
 Spot change since 2005                16.48%
 revaluation                           
 
    Key indexes:
     
 Item            Current     Previous  Change
                                       
 Thomson         92.82       92.83     0.0
 Reuters/HKEX                          
 CNH index                             
 Dollar index    99.345      99.177    0.2
 
*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    7.116     -0.15%
        *                        
 Offshore              7.2028    -1.61%
 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 Noah Sin; Editing by Jacqueline Wong)
  
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below