SHANGHAI: China’s yuan was slightly firmer against the US dollar on Thursday, in tandem with a stronger Japanese yen, even after the nation’s central bank set the official guidance at its weakest level in more than eight months.
The spot yuan opened at 7.1730 per dollar and was last trading 29 pips firmer than the previous late session close and 0.38% weaker than the midpoint.
The yen firmed on Thursday after a sharp drop in the previous session, continuing a week of heightened volatility as investors weigh the unwinding of popular carry trades and try to second guess the rate path Japan’s central bank is likely to take.
The sharp moves in the yen has pushed down the dollar index , which measures the US currency against six rivals including the yen.
The Chinese currency strengthened even after the People’s Bank of China set the midpoint rate, around which the yuan is allowed to trade in a 2% band, at 7.1460 per dollar, its weakest since Nov 20, 2023 and 361 pips firmer than a Reuters’ estimate, prior to the market opening.
The central bank has been gradually lowering its daily yuan official guidance, well within market projections but with a bias suggesting it is allowing some depreciation, traders and analysts said.
The weak guidance comes after China’s exports grew at their slowest pace in three months in July, missing expectations and adding to concerns about the outlook for the vast manufacturing sector.
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“The slowing China exports figures for July reinforced the argument the PBOC is unlikely to pursue CNY appreciation due to concerns about trade outlook,” said Ken Cheung, director of FX strategy at Mizuho Securities Asia.
“The PBOC’s clear signal to exit its CNY fixing support also highlighted upside risk for the USD/CNY fixing in the coming month.”
Traders are cautiously awaiting the weekly US jobless claims data later in the day, which could prove market moving following soft monthly payrolls figures on Friday that exacerbated fears of a US economic downturn.
“It is quite clear that sentiment remains fragile and we caution that there could be some volatility from jobless claims data in the US tonight, especially if the data reinforces the narrative of a US recession,” Maybank analysts said in a note.
The offshore yuan traded at 7.176 yuan per dollar, down about 0.04% in Asian trade.
The dollar’s six-currency index was 0.029% lower at 103.08.
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