SHANGHAI: Helped by a firmer daily fixing, the yuan strengthened marginally against the dollar on Tuesday, although several investment banks cut economic growth forecasts for China.
Goldman Sachs said in a note that it had lowered its 2021 growth forecast for China to 7.8% from 8.2%, as energy shortages and deep industrial output cuts add "significant downside pressures".
The People's Bank of China (PBOC) also changed the wording in a statement after its latest quarterly monetary policy committee meeting to remove a reference to "stable and consolidating growth" contained in the previous statement.
"The PBOC downgraded its assessment to China growth outlook," said Ken Cheung, chief Asian FX strategist at Mizuho Bank in Hong Kong.
Yuan buoyed by prospects for improved Sino-US ties
"In our view, the PBOC is paying more attention to maintain the stable growth of credit expansion as well as its effectiveness to support the real economy."
Prior to market opening, the PBOC set the midpoint rate at 6.4608 per dollar, 87 pips or 0.13% firmer than the previous fix of 6.4695.
The spot market opened at 6.4596 per dollar and was changing hands at 6.4556 at midday, 14 pips firmer than the previous late session close.
Doubts over the economy's post-pandemic recovery eclipsed any optimism over an improvement in Sino-US relations that investors were able to draw from the release of Huawei Technologies Co's Chief Financial Officer Meng Wanzhou, who returned to China over the weekend, following more than 1,000 days under house arrest in Canada.
Separately, US yields have been pulled higher by a hawkish shift at the Federal Reserve, with the benchmark 10-year Treasury yields touching a three-month high of 1.516% overnight, raising speculation that the it could lead to capital outflows from China, as investors seek higher returns.
"RMB was expected to remain resilient in the face of rising UST yields as the currency remains in the sweet spot of carry advantage and stable macro fundamentals relative to other EM peers," analysts at Maybank said in a note.
By midday, the global dollar index rose to 93.453 from the previous close of 93.411, while the offshore yuan was trading at 6.459 per dollar.
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