SHANGHAI: China’s yuan bounced from a one-month low against the dollar on Tuesday, as corporate clients rushed to take profits on earlier greenback gains made after markets dramatically increased bets on more aggressive US interest rate hikes. Fast-changing views in financial markets have opened the door to a larger-than-expected three-quarter-percentage point interest rate increase at the Federal Reserve’s policy meeting this week.
In the spot market, onshore yuan opened at 6.7600 per dollar and eased to a low of 6.7650, the weakest level since May 19. However, by midday, it was changing hands at 6.7381, 149 pips firmer than the previous late session close.
Currency traders said weakness in the yuan in early trade prompted some corporate clients to quickly convert their dollar holdings into the yuan to lock in profits, lending some support for the local currency. Some market participants expect Beijing will step up monetary easing to arrest the economic slowdown caused by COVID-19 disruptions, but widening policy divergence with the United States could risk yuan depreciation and capital outflows.
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