China's yuan near 1-month low, losses stemmed by Evergrande relief

SHANGHAI: China's yuan weakened to a near one-month low against the dollar on Wednesday, the first trading day after the Mid-Autumn Festival holiday, as some investors caught up on a recent rally in the greenback.

But losses were capped after heavily indebted Chinese property giant Evergrande said it would make an bond coupon due on Thursday, offering some relief to investors worried about a possible default.

Prior to market opening, the People's Bank of China (PBOC) set the midpoint rate at 6.4693 per dollar, 166 pips, or 0.26%, softer than the previous fix of 6.4527, and the weakest since Aug. 27.

In the spot market, onshore yuan opened at 6.4725 per dollar and fell to a low of 6.4737, the weakest level since Aug. 27. By midday, it was changing hands at 6.4714, 53 pips softer than the previous late session close.

Traders said the Federal Reserve's policy meeting remained the key focus as markets were anxious about the pace of pandemic-era stimulus withdrawal, which could bring volatility to major currencies.

Li Liuyang, chief FX analyst at China Merchants Bank, said the wording around inflation in the Fed's post-meeting statement, changes to "dot plot" and Chair Jerome Powell's comments on employment could all affect market sentiment.

"If market expectations for Fed tightening and rate hike change after the September meeting, the dollar was likely to climb higher," Li said, referring to an earlier tightening than market predicted.

Separately, China stood pat on its benchmark lending rate for corporate and household loans, as expected, but analysts saw chances for an imminent rate cut to prop up the economy.

"With the economy losing steam and concerns around the property sector growing, we think policy rate cuts by the PBOC could come as soon as next month," said Julian Evans-Pritchard, senior China economist at Capital Economics.

By midday, the global dollar index rose to 93.27 from the previous close of 93.222, while the offshore yuan was trading at 6.475 per dollar.