Yuan inches up, but set for longest weekly losing streak since 2018

SHANGHAI: China's yuan inched up against the dollar on Friday, while investors eyed US jobs data that could indicate the pace of recovery in the world's largest economy for more trading cues.

But the yuan stayed on course for a seventh weekly drop, the longest such streak since 2018, hit by a broad dollar strength.

The US nonfarm payroll data, due later in the day, could confirm the market view of a steady US economic recovery and prop up the dollar further, bringing volatility to other major currencies, several yuan traders said.

Prior to market opening, the People's Bank of China (PBOC) set the midpoint rate at 6.5649 per dollar, 65 pips or 0.1% weaker than the previous fix of 6.5584.

In the spot market, onshore yuan opened at 6.5661 per dollar and was changing hands at 6.5625 at midday, 30 pips firmer than the previous late session close.

Many market participants have squared their books before the US jobs data and the upcoming April 3-5 Tomb Sweeping holiday, while overseas markets lack guidance as investors are away for Easter holidays, some currency traders said.

"As USD/CNY is now increasingly reactive to the dollar index, and COVID is yet to be under control in the US and Europe, we are revising our forecast of USD/CNY to 6.30 from 6.20 by the end of 2021," said Iris Pang, chief economist for Greater China at ING.

The global dollar index is set for its third week of gains on prospects of a solid economic recovery due to accelerating vaccinations and massive fiscal stimulus.

Some other economists believed the continued capital inflows following Chinese government bond's inclusion into global indexes and relatively wide yield advantage between China and other major economies were still supportive of the yuan.

"The CNY is likely to remain supported by China's solid economic recovery and increasing capital inflows," said Li Wei, senior China economist at Standard Chartered.

"While the USD may rebound modestly near-term on a strong US economic recovery, weak fundamentals - including record trade and fiscal deficits - are likely to weigh on the USD in the medium term," he added.

He maintained his forecast for the yuan to trade at 6.4 per dollar at end-June but ease to 6.45 at end-2021.

The dollar index fell to 92.865 at midday, while the offshore yuan was trading at 6.5694 per dollar.