HONG KONG: The yuan eased against the dollar on Wednesday after hawkish comments by a Federal Reserve official supported the greenback and on weaker guidance from China’s central bank.
The yuan has lost 1.8% this year, pressured by its relative low yields versus other currencies and a struggling property market which is weighing heavily on the economy.
The US dollar rose against most currencies overnight, and remained firm on Wednesday, following Minneapolis Fed President Neel Kashkari’s comments that the US central bank may hold rates steady all year to fight inflation.
Prior to the market’s opening, the People’s Bank of China set the midpoint rate, around which the yuan is allowed to trade in a 2% band, at 7.1016 per US dollar prior to the market open, weaker than the previous fix of 7.1002 but still much firmer than expected.
“Chinese exports remain competitive in the global markets, and capital outflow pressures stayed elevated,” Goldman Sachs analysts said in a note.
“The recent move in the USD/CNY fixing is likely to be a ‘reset’ in fixing to relieve some pent-up depreciation pressures,” they said.
The spot yuan opened at 7.2201 per dollar and was changing hands at 7.2248 at midday, 67 pips away from the previous late session close and 1.73% away from the midpoint.
Yuan softens after weaker PBOC guidance
The global dollar index rose to 105.549 from the previous close of 105.412.
The offshore yuan was trading 0.08% weaker than the onshore spot at 7.2305 per dollar.
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