Shanghai, December 27 (Reuters) –China’s yuan hovered near a one-week low against the dollar on Wednesday, weighed down by signs of loosening yuan liquidity in onshore markets.
Traders said cash conditions eased towards the end of the year after the central bank injected fresh funds into the banking system for a sixth consecutive day to smooth out high seasonal demand. , added that the easing of the situation weighed on the currency somewhat.
Benchmark overnight repo volume weighted average rate CN1DRP=CFXS The yuan, which is traded on the interbank market and is a measure of onshore yuan liquidity, fell to 1.4388% on Wednesday, its lowest level since September.
land renminbi CNY=CFXS The dollar opened at 7.1420 and fell to a low of 7.1505, not far from the one-week low of 7.1516. By midday, the trade had changed hands at 7.1494, 69 pips lower than the closing price late in the previous session.
Traders and analysts said market activity was generally subdued as many market participants were on holiday.
Before the market opened, the People’s Bank of China (PBOC) set an intermediate interest rate CNY=People’s BankAround this time, the renminbi is allowed to trade in a range of 2%, and is now 7.1002 yuan to the dollar, 37 pips lower than the previous 7.0965 yuan.
However, traders and analysts said the central bank continued its months-long effort to set interim interest rates at a stronger than expected level, which they interpreted as an official attempt to maintain stability in the yuan. He said that
Official guidance on Wednesday was 400 pips firmer than Reuters’ forecast of 7.1402 pips to the dollar.
“The stronger-than-expected renminbi correction signals that policymakers want to adjust the renminbi to reflect recent market trends, including a weaker U.S. dollar,” Christopher Wong, foreign exchange strategist at OCBC Bank, said in a note. ”, he said in a note.
The yuan has come under downward pressure as the dollar weakened amid growing expectations that the US Federal Reserve would start cutting interest rates next year, but the yuan has been under pressure in the world’s second-largest economy. It is facing downward pressure mainly due to the sluggish economic recovery and yield disparity with major economies. .
At one point this year, the yuan depreciated 6.14% against the dollar before recouping some of its losses. The currency is still down about 3.5% against the dollar, and is expected to fall for the second consecutive year.
“The dynamics of interest rate differentials, dollar yields and the dollar index could still lead to volatility,” said Wang Tao, chief China economist at UBS.
“The narrowing US-China yield differential, the expected weaker US dollar, and improved confidence in the Chinese economy will all support a moderate appreciation of the renminbi against the dollar in 2024,” Wang said. The forecast was raised to 7.0 yuan to the dollar. Previously he will be from 7.15 to the end of 2024.
Renminbi market as of 0319 GMT:
Onshore spot:
|
item |
the current |
previous |
change |
|
People’s Bank Midpoint CNY=SAEC |
7.1002 |
7.0965 |
-0.05% |
|
spot renminbi CNY=CFXS |
7.1494 |
7.1425 |
-0.10% |
|
Deviation from midpoint* |
0.69% |
||
|
Spot change since the beginning of the year |
-3.49% |
||
|
Spot changes since 2005 reassessment |
15.76% |
||
Main index:
|
item |
the current |
previous |
change |
|
Thomson Reuters/Hong Kong Exchange CNH Index |
0.0 |
||
|
dollar index |
101.557 |
101.466 |
0.1 |
*Difference between the exchange rate of the dollar and the renminbi. A negative number indicates that the spot RMB has appreciated more than the midpoint. The People’s Bank of China (People’s Bank of China) allows exchange rates to rise or fall by 2% from the official midpoint rate set each morning.
Offshore CNH market
|
musical instrument |
the current |
Differences from track and field |
|
offshore spot renminbi CNH= * |
7.1535 |
-0.06% |
|
Offshore non-deliverable forward CNY1YNDFOR= ** |
6.9735 |
1.82% |
*Offshore spots are more premium than onshore spots CNY=CFXS
**Non-deliverable forwards are settled against the midpoint, so this figure reflects the difference from the PBOC’s official midpoint. CNY=SAEC.
Reported by Shanghai Newsroom.Edited by Muralikumar Anantharaman
