SHANGHAI: The yuan hovered around 6.40 per dollar on Monday as strong Chinese trade data lent support and helped offset strength in the greenback amid US monetary tightening expectations.
The spot yuan opened at 6.3975 per dollar and was changing hands at 6.3971 at midday, slightly firmer than the previous late session close. The People’s Bank of China set the midpoint rate at 6.3959 per dollar prior to market open, slightly weaker than expected. Some traders interpreted it as a sign that the PBOC doesn’t want the yuan to rise too much.
China’s export growth beat economists’ forecasts in October, while imports missed expectations, resulting in a record trade surplus. “Overall, the strong China trade figures should help counter the new downward pressures for growth in Q4,” wrote Ken Cheung, chief Asian FX strategist at Mizuho Bank Ltd. Other data that will garner attention include credit expansion for October and inflation data, Cheung added.
Money supply and loan data are due between Nov. 10-17 and inflation data is expected on Nov. 10. Also aiding sentiment toward the yuan, the Communist Party begins a meeting on Monday which is expected to pave the way for President Xi Jinping to secure an unprecedented third five-year term as president. However, some analysts say the yuan could face downward pressure going forward if exports wane.
A big problem for exports is that “foreign demand is likely to drop back as shifts in consumption patterns due to the pandemic unwinds and backlogs of orders are gradually cleared,” Capital Economics wrote in a report.
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