AGL 8.30 Decreased By ▼ -0.03 (-0.36%)
ANL 10.95 Increased By ▲ 0.25 (2.34%)
AVN 79.70 Increased By ▲ 1.51 (1.93%)
BOP 5.75 Increased By ▲ 0.18 (3.23%)
CNERGY 5.64 Increased By ▲ 0.26 (4.83%)
EFERT 79.36 Increased By ▲ 0.71 (0.9%)
EPCL 67.48 Decreased By ▼ -0.31 (-0.46%)
FCCL 14.89 Increased By ▲ 0.39 (2.69%)
FFL 6.70 Increased By ▲ 0.10 (1.52%)
FLYNG 7.16 Increased By ▲ 0.13 (1.85%)
GGGL 11.60 Increased By ▲ 0.26 (2.29%)
GGL 17.51 Increased By ▲ 0.27 (1.57%)
GTECH 8.35 Increased By ▲ 0.05 (0.6%)
HUMNL 7.17 Increased By ▲ 0.11 (1.56%)
KEL 3.14 Increased By ▲ 0.06 (1.95%)
LOTCHEM 35.20 Increased By ▲ 2.33 (7.09%)
MLCF 28.35 Increased By ▲ 0.05 (0.18%)
OGDC 87.70 Increased By ▲ 3.15 (3.73%)
PAEL 16.63 Increased By ▲ 0.18 (1.09%)
PIBTL 6.05 Increased By ▲ 0.20 (3.42%)
PRL 19.46 Increased By ▲ 1.34 (7.4%)
SILK 1.14 No Change ▼ 0.00 (0%)
TELE 11.41 Increased By ▲ 0.31 (2.79%)
TPL 9.20 Increased By ▲ 0.20 (2.22%)
TPLP 20.25 Increased By ▲ 0.37 (1.86%)
TREET 27.10 Increased By ▲ 0.48 (1.8%)
TRG 96.20 Increased By ▲ 1.70 (1.8%)
UNITY 20.85 Increased By ▲ 0.48 (2.36%)
WAVES 13.90 Increased By ▲ 0.27 (1.98%)
WTL 1.34 Increased By ▲ 0.03 (2.29%)
BR100 4,275 Increased By 67 (1.59%)
BR30 15,794 Increased By 348.3 (2.26%)
KSE100 42,872 Increased By 628.4 (1.49%)
KSE30 16,219 Increased By 247.6 (1.55%)
Markets

Yuan advances to 1 week high on capital inflows, basket index highest since 2016

  • A chief dealer at a Chinese bank said he expected the index to test 99 to 101 in the near-term
Published July 22, 2021

SHANGHAI: China's yuan advanced to a one-week high against a slightly weaker dollar on Thursday, underpinned by foreign capital inflows against the backdrop of a recovery in risk appetite in global markets.

The spot market opened at 6.4686 per dollar and rose to a high of 6.4653, the strongest level since July 16. By midday, it was changing hands at 6.4664, 21 pips firmer than the previous late session close.

Currency traders said heavy corporate dollar selling in favour of the yuan and recent foreign fund inflows into mainland financial markets supported the Chinese yuan, as Thursday marked the fourth straight day the A-share market saw net inflows via the Stock Connect scheme.

China's yuan weakens as central bank notches eighth straight softer fixing

"Regarding the asset diversification, the People's Bank of China (PBOC) managed to adopt its independent monetary policy cycle on the basis of local economy development, rather than depending on the Federal Reserve's policy akin to other EM Asian currencies," said Ken Cheung, chief Asian FX strategist at Mizuho Bank in Hong Kong.

"Such low correlations with (the) Fed's policy should offer diversification benefits in the portfolio management for the overall returns enhancement."

Prior to market opening, the PBOC set the midpoint rate at a one-week high of 6.4651 per dollar, 184 pips or 0.28%, stronger than the previous fix of 6.4835.

The strengthened official guidance rate has pushed China's trade-weighted yuan basket index, as measured by the China Foreign Exchange Trade System (CFETS), to 98.77, the highest since March 15, 2016, up 4.15% so far this year, according to Reuters' calculations based on official data.

Markets debated whether a strong basket index could undermine China's export competitiveness and prompt policymakers to change the country's FX policy to rein in the yuan's strength.

The 98 level used to be considered as the ceiling for the CFETS index, but some traders and analysts said they were not too worried this time as exports remained resilient given China's relative success in containing the pandemic.

A chief dealer at a Chinese bank said he expected the index to test 99 to 101 in the near-term.

"It also depends on the dollar index's performance in the medium term," he said.

"Generally speaking, a weaker dollar is conducive to a stronger yuan index, and a stronger greenback could translate to a weaker yuan index."

By midday, the global dollar index fell to 92.773 from the previous close of 92.803, while the offshore yuan was trading at 6.4685 per dollar.

Comments

Comments are closed.