SHANGHAI, Jan 8 (Reuters) - China's yuan edged higher
against the dollar on Friday and looked set for its best week in
two months, despite fresh measures rolled out by the central
bank overnight to ease capital inflows and slow the currency's
rally.
The yuan has gained up nearly 1% against the greenback in
the first week of the new year, building on a near 7% rise in
2020, but the rapid gains have made the authorities feel
increasingly uncomfortable.
On Thursday night, the People's Bank of China (PBOC) said it
had tightened the way it assesses cross-border financing risks
to make it harder for domestic firms to raise funds in overseas
markets, a move that markets believed was to lower the upper
limit for companies to borrow overseas.
"The PBOC has stepped up efforts to cool down the
yuan's one-sided appreciation," Gao Qi, FX strategist at
Scotiabank in Singapore, said in a note.
"In our view, the central bank's gentle measures are not
intended to halt or reverse the yuan appreciation, but aimed at
smoothing extreme movements in the local FX market and curbing
the herd behavior there."
On Friday, the PBOC set the midpoint rate at
6.4708 per dollar prior to the market open, 100 pips or 0.15%
weaker than the previous fix of 6.4608.
The onshore spot yuan opened at 6.4700 per dollar
and was changing hands at 6.4660 at midday, 119 pips firmer than
the previous late session close.
If the yuan finishes the late night session at the midday
level, it would have gained 0.96% to the dollar for the week,
the biggest weekly gain since early November.
Despite chaos in Washington just weeks ahead of U.S.
President-elect Joe Biden taking office, many analysts and
investors hope the incoming administration will work to improve
strained relations between the world's two largest economies.
"We expect Biden will opt for a strategic review of the
relationship between the U.S. and China, engaging dialogues.
This should help reduce headline volatility and fears of
de-globalisation; thus providing a favourable background for the
CNY," said Marco Sun, chief financial market analyst at MUFG
Bank.
Separately, a new Reuters poll showed that most emerging
market currencies will continue last year's rally against a
tumbling dollar into 2021 as a thirst for higher yield and hopes
for a successful coronavirus vaccine rollout helps drive gains.
The partly managed but most actively traded emerging market
currency was predicted to edge up about 1% to 6.40 per dollar by
end-year.
The global dollar index rose to 89.861 at midday,
when the offshore yuan was trading at 6.46 per dollar.
The yuan market at 0403 GMT:
ONSHORE SPOT:
Item Current Previous Change
PBOC midpoint 6.4708 6.4608 -0.15%
Spot yuan 6.466 6.4779 0.18%
Divergence from -0.07%
midpoint*
Spot change YTD 0.96%
Spot change since 2005 28.00%
revaluation
Key indexes:
Item Current Previous Change
Thomson 95.88 95.78 0.1
Reuters/HKEX
CNH index
Dollar index 89.861 89.815 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% from official midpoint rate it sets each
morning.
OFFSHORE CNH MARKET
Instrument Current Difference
from onshore
Offshore spot yuan 6.46 0.09%
*
Offshore 6.5953 -1.89%
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 Winni Zhou and Andrew Galbraith)
.Source
Related