SHANGHAI: China’s yuan slipped against the dollar on Thursday after the central bank guided the currency much lower through its official fix following a recent surge.
The Chinese currency leapt earlier this week to the highest since November, underpinned by an unwinding of carry trades and a broader rush out of US assets and back into Asia.
Prior to market opening on Thursday, the People’s Bank of China (PBOC) set the midpoint rate, around which the yuan is allowed to trade in a 2% band, at 7.2073 per dollar, its weakest since April 24.
“We think the PBOC is signalling preference for yuan stability via its daily USD/CNY fixing,” analysts at Barclays said in a note.
“Markets will now look for hard data and tariff negotiation-related news flow to guide the next leg in the dollar and thereby USD-Asia.”
As of 0311 GMT, the onshore yuan was 0.11% lower at 7.2326 per dollar. It hit a six-month high of 7.2105 on Tuesday.
Its offshore counterpart was down 0.02% at 7.2295. Currency traders said market focus remained on trade negotiations, as US and Chinese officials prepare to meet in Switzerland this weekend for talks that could be the first step toward resolving a trade war disrupting the global economy.
China’s yuan dips after rate cut announcement
“Markets remained cautious as the trade talk trajectory could be bumpy,” said a trader at a Chinese bank.
Some market participants also noted that overseas listed Chinese companies could take advantage of recent yuan strength to frontload their foreign exchange demand for dividend payouts to the second quarter from the traditional third quarter.
Such a scenario usually creates seasonal downside pressure on the Chinese yuan.
The US dollar was largely firm after the Federal Reserve on Wednesday held interest rates steady and signalled it was in no hurry to further cut rates, as policymakers try to get a handle on rising uncertainty in the face of President Donald Trump’s global trade war.
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