Chinese yuan at 6-month high after weaker-than-expected fix

SHANGHAI, Dec. 2 (Reuters) – The Chinese yuan eased Thursday after a six-month peak against the dollar reached a day earlier as weaker-than-expected official forecasts discouraged investors from pursuing the currency.

Before the market opened, the People’s Bank of China (PBOC) pegged the median rate at 6.3719 per dollar, 23 pips lower than the previous patch of 6.3693.

However, many market analysts and traders said Thursday’s official policy rate was much lower than their expectations, a sign that authorities may feel uncomfortable with the recent rally in the yuan as it headed. towards the highest level this year in onshore and offshore trading.

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Thursday’s official fixing was 71 pips weaker than Reuters forecast of 6.3648.

In the spot market, the onshore Yuan opened at 6.3705 to the dollar and changed hands at 6.3693 by noon, 5 pips lower than the previous close at the end of the session.

The spot rate hit a six-month high at 6.3596 per dollar on Wednesday, not far from this year’s high of 6.3565, and is up about 2.5% year-to-date to become one of the best performing Asian currencies in 2021.

Currency traders said that despite the persistent conversion of their foreign exchange earnings to yuan for various payments at the end of the year, some of their corporate clients were taking advantage of a cheaper dollar to charge the greenback in morning trades.

Standard Chartered analysts said they still see a limited rise in the yuan and expect authorities to step up policy measures to counter further pressure on appreciation.

“The chances of a brutal direct intervention remain low, in our view, as the recent appreciation of the CNY is largely driven by fundamental factors,” they said in a note.

“We believe that the most likely option to curb further appreciation is to further increase the foreign currency reserve requirement ratio (…) take further action to reduce the speculative positions of onshore banks by reducing their position limits net openings, expanding outbound investment channels and renewing the introduction of the counter-cyclical adjustment factor. “

Sources told Reuters earlier this month that a central bank-led self-regulatory group that helps oversee China’s forex sector had asked commercial banks to cap the size of their trading accounts to limit the speculation by financial institutions on the yuan. Read more

As of noon, the broad dollar index fell to 95.973 from the previous close of 96.046, while the offshore yuan traded at 6.3703 per dollar.

The yuan market at 04:00 GMT:

PLACE ON LAND:

Key indexes:

* Divergence in dollar / yuan exchange rate. A negative number indicates that the 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 the official median rate it sets each morning.

CNH OFFSHORE MARKET

* Premium for the offshore spot on onshore

** The figure reflects the difference from the official midpoint of the PBOC, as undeliverable futures are settled relative to the midpoint. .

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Reporting by Winni Zhou and Andrew Galbraith Editing by Shri Navaratnam

Our Standards: Thomson Reuters Trust Principles.


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