China’s yuan steady as strong dollar offsets growth optimism

SHANGHAI, Oct 19 (Reuters)China’s yuan was steady against the dollar on Thursday, as strength in the dollar index as Middle East tensions and concerns about the Federal Reserve’s rate decisions offset some optimism from China’s better-than-expected economic data.

Beijing’s persistent stabilisation efforts to slow the yuan’s weakening trend also offered some support during the day, through the central banks’s strong fixing bias.

The People’s Babank’s China set the midpoint rate CNY=PBOC, around which the yuan is allowed to trade in a 2% band, at 7.1795 per U.S. dollar prior to market open.

In the spot market, the yuan CNY=CFXS opened at 7.3101 per dollar and was changing hands at 7.3160 at midday, 9 pips weaker from the previous late session close.

China’s economy grew at a faster-than-expected clip in the third quarter, while consumption and industrial activity in September also surprised on the upside, suggesting recent policy measures is helping to bolster a tentative recovery.

But the positivity was outweighed by a strong greenback which received support from a surge in U.S. Treasury yields overnight amid geopolitic risks in the Middle East and the Fed’s messaging that interest rates may stay higher for longer.

“RMB has not been able to shrug off USD strength despite China’s better-than-expected Q3 growth of 4.9%,” said DBS analysts in a note, referring to the yuan.

“Meanwhile, the onshore USD/CNY fixing had been held stable at around 7.17 for 18 straight trading days since mid-Sep, resulting in a stronger RMB basket index.”

Despite a recovery in broad economic growth, a deepening downturn in the property sector contintued to weigh on investor sentiment as data on Thursday showed China’s new home prices fell for the third straight month in September.

“RMB sentiment remains bearish due to concerns over potential bond defaults by property developers,” said Ken Cheung, chief Asian FX strategist at Mizuho Bank. “The struggling property sector remains the key drag on the recovery for China economy.”

Country Garden 2007.HK was due on Wednesday to pay a $15 million coupon payment on a bond due September 2025, but two bondholders of China’s biggest private property developer told Reuters they were yet to receive it.

Overseas, market attention now turns to Fed Chair Jerome Powell, who is set to speak on Thursday, for further clues of the U.S. central bank’s policy path.

The global dollar index .DXY rose to 106.608 from the previous close of 106.565. The offshore yuan CNH=D3 was trading at 7.3273 per dollar.

The yuan market at 0428 GMT:






PBOC midpoint CNY=SAEC

Spot yuan CNY=CFXS

Divergence from midpoint*

Spot change YTD

Spot change since 2005 revaluation

Key indexes:





Thomson Reuters/HKEX CNH index

Dollar index

*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.




Difference from onshore

Offshore spot yuan CNH= *

Offshore non-deliverable forwards CNY1YNDFOR= **

*Premium for offshore spot over onshore CNY=CFXS

**Figure reflects difference from PBOC’s official midpoint, since non-deliverable forwards are settled against the midpoint. CNY=SAEC.

(Reporting by Shanghai Newsroom; Editing by Lincoln Feast.)


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