China’s Yuan Weakens Past Key Threshold to 2-Month Low
16:00 JST, May 12, 2023
The yuan breached the psychologically important 6.95 per dollar in early trade, as losses accelerated after the spot rate crossed 200-day moving average of 6.94.
The currency’s weakness followed a slew of downbeat data, suggesting that China’s economic recovery might have lost some steam, with weak confidence holding back post-pandemic spending and growth.
However, currency traders said corporate clients emerged as dollar sellers after the yuan weakened above the key 6.95 per dollar level, in a move anticipated by analysts at Barclays.
“Chinese exporters have been hoarding dollar receivables,” Barclays analysts said in a note published last week.
“We see 6.95 as first resistance level for USD/CNY, as exporters could sell dollar holdings at these levels.”
Prior to market opening, the People’s Bank of China (PBOC) set the midpoint rate
In the spot market, the onshore yuan
If the yuan finishes the late night session at the midday level, it would have lost 0.6% against the dollar for the week, the biggest weekly drop since late February.
“Unless a higher USD/CNY reaches an inflection point, creating a self-fulfilling vicious cycle of higher USD/CNY and subsequent capital outflows, intervention in the FX market is likely to be limited at this stage,” Kiyong Seong, lead Asia macro strategist at Societe Generale said in a note.
With “big four” state-owned banks being told to reduce the ceiling on interest rates they pay on some deposits, traders said investors would pay close attention to the central bank’s medium-term policy loan rollover on Monday to gauge the official stance on monetary policy.
“China reopening remains disappointing and so we expect further stimulus in coming months,” said Win Thin, global head of currency strategy at Brown Brothers Harriman.
“So far, the measures taken have had little impact on the economy.”
By midday, the global dollar index <.DXY> rose to 102.093 from the previous close of 102.058, while the offshore yuan
The one-year forward value for the offshore yuan
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