SHANGHAI: China’s yuan eased against the US dollar on Tuesday, after a lower setting for the official midpoint and slightly stronger corporate demand for the greenback, which is weakening. The global dollar index, a gauge that measures the unit’s strength against six other major currencies, slipped to 92.901 at midday from the previous close of 92.904.
The dollar has weakened as markets await developments on US tax reform bills. Prior to market opening on Tuesday, the People’s Bank of China (PBOC) set the midpoint rate lower for a third straight day at 6.5944 per dollar, 70 pips or 0.11 percent below the previous fix of 6.5874.
The onshore yuan opened at 6.5985 per dollar and was changing hands at 6.6052 at midday, 77 pips weaker than the previous late session close and 0.16 percent softer than the midpoint.
Multiple traders expect that dollar-buying by companies and households will rise as year-end approaches, they said there’s nearly no chance the yuan will weaken past the key 7 per dollar level.
“The central bank emphasizes financial stability. But the PBOC generally lets USD/CNY reflect the overnight movement of the USD against other currencies,” ANZ said in a note on Tuesday.
In a Nov. 24 report, ANZ said it expected the yuan to be at 6.65 to the dollar at end-2017 and 6.75 by end-2018.
The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 95.10, weaker than the previous day’s 95.15.
The offshore yuan was trading 0.02 percent weaker than the onshore spot at 6.6063 per dollar.
Offshore one-year non-deliverable forwards contracts (NDFs), considered the best available proxy for forward-looking market expectations of the yuan’s value, traded at 6.7615, 2.47 percent weaker than the midpoint.
One-year NDFs are settled against the midpoint, not the spot rate.
Source: Brecorder.com
