Yuan Weakens Against U.S. Dollar

On Wednesday, the yuan in China eased against the U.S. dollar after the central bank set the daily midpoint at its sturdiest level in 20 months, prompting a rush of dollar buying by corporates.

Yuan eased against Dollar after Central Bank set a daily midpoint.

Proceeding to the opening of the market on Wednesday, the People’s Bank of China (PBOC) has set its official yuan midpoint at 6.4920 per dollar, breaking the key threshold of 6.5 per dollar level.

The official midpoint on Wednesday was 159 pips, or 0.24 percent, steadier than Tuesday’s fixes of 6.5079 and was the strongest since May 3, 2016.

Meanwhile, in the spot market, the onshore yuan opened at 6.4988 per dollar. It was changing hands at 6.5057 at midday, which are 108 pips weaker than the previous late session close at 0.21 percent softer than the midpoint.

According to traders, the corporate demand for the greenback emerged after the spot yuan rate reinforced to below 6.5 per dollar.

A trader at a foreign bank in Shanghai stated that the overall market sentiment remained cautious as the market had no strong expectations for the yuan’s trend.

Securities Times, which is run by the state, warned against the “over-inflated” expectations for the yuan in a front-page commentary on Wednesday.

“Currently, the yuan exchange rate is strengthening to approach a high it reached in September ... Should the yuan continue to rise? Obviously, it requires the central bank to release some signal to stabilize the Chinese currency,” stated the report, strengthening that the 6.5 per dollar level stayed “a key threshold.”

The report also added that a sustained growth in the yuan would damage exports and stimulate speculation in the foreign exchange market.

Some traders stated that they did not expect any policy to be taken out to stabilize the yuan any time soon as the market was already firm.

The HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 95.76, weaker than the previous day’s 95.93.

The global dollar index increased to 91.917 from the previous close of 91.872, while the offshore yuan was trading at 0.01 percent, which is firmer than the onshore spot at 6.505 per dollar.

The offshore one-year non-deliverable forwards contracts or NDFs, considered the best available substitution for forward-looking 

market expectations of the yuan’s value, which is traded at 6.6395, it is 2.22 percent weaker than the midpoint.

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