SHANGHAI: China’s yuan rose against the dollar on Friday and looked set for a second quarterly gain, as market sentiment was supported by better-than-expected manufacturing data and on upbeat official comments on the economic outlook.
China’s manufacturing activity beat market expectations in March, despite expanding at a slower pace, official data showed on Friday, while activity in the services sector grew at the fastest pace in nearly 12 years.
“The strong PMI figures echoed Premier Li’s upbeat remark on the growth outlook in March at his speech yesterday and propel China reopening trade momentum,” said Ken Cheung, chief Asian FX strategist at Mizuho Bank.
China’s economic performance has improved in March from the first two months and the country will expand domestic demand and consolidate its economic recovery, Premier Li Qiang said at an economic forum in Boao.
The dollar’s slightly subdued tone on the day also underpinned the yuan, with the greenback set for its second quarterly loss.
Prior to the market opening, the People’s Bank of China (PBOC) set the midpoint rate at 6.8717 per dollar, 169 pips firmer than the previous fix of 6.8886.
The spot yuan opened at 6.8550 per dollar and was changing hands at 6.8584 at midday, 126 pips firmer than the previous late session close.
If the yuan finishes the late night session at the midday level, it would have gained 0.6% to the dollar in January to March period, booking the second straight quarterly gain.
Some analysts said financial markets were still assessing the impacts of the global banking crisis, which offered some support for Asian currencies including the yuan.
China’s yuan eases as bank relief boosts dollar, PMI in focus
“While markets sift through the extent and breadth of the damage from the banking stresses, we think Asian currencies can continue to outperform the dollar, euro and other lower-yielding emerging market (EM) currencies,” analysts at Goldman Sachs said in a note.
“We continue to see USD/CNY move towards our 3-month forecast of 6.80, which should also provide an anchor for non-Japan Asian (NJA) currencies.”
By midday, the global dollar index was steady at 102.164 from the previous close of 102.144.
The one-year forward value for the offshore yuan traded at 6.6974 per dollar, indicating a roughly 2.40% appreciation within 12 months.
Comments
Comments are closed for this article.