SHANGHAI/SINGAPORE: China’s yuan eased on Monday as upbeat US payrolls boosted chances the Federal Reserve will further raise interest rates, while investors looked to upcoming domestic data for more clues on the health of the world’s second-largest economy.
The dollar rallied after US employers maintained a strong pace of hiring in March, pushing the unemployment rate back down to 3.5% and signalling labour market resilience that will keep the Fed on track to hike rates one more time next month.
The dollar held on to gains on Monday which pressured other major currencies including the yuan.
Prior to market opening, the People’s Bank of China (PBOC) set the midpoint rate at 6.8764 per dollar, 74 pips firmer than the previous fix of 6.8838.
In the spot market, the onshore yuan opened at 6.8813 per dollar and was changing hands at 6.8768 at midday, 118 pips weaker than the previous late session close.
Trading was thin on Monday as many overseas markets remained closed for the Easter Monday holiday.
The onshore yuan swung in a range of 80 pips in morning deals, while volume stood at $10.2 billion around midday, compared with a normal half-day volume of about $15 billion.
“The consolidation mode continued due to lack of catalyst,” said Tommy Xie, head of Greater China research at OCBC Bank.
“The pace of RMB movement in the near term may still depend on the dollar movement.”
Currency traders said investors refrained from betting on a stronger yuan for the time being due largely to expectations of a widening yield gap between China and the United States.
“Markets will also need more domestic economic data to show the pace of recovery,” a trader at a foreign bank said.
China’s yuan eases as market looks to US jobs data for rate clues
China is due to report March credit lending, trade and inflation data later this week and first quarter gross domestic product (GDP) and activity indicators next week. Currency traders widely believe these figures could offer a more comprehensive picture of the broad domestic economy.
By midday, the global dollar index rose to 102.19 from the previous close of 102.092, while the offshore yuan was trading at 6.8782 per dollar.
The one-year forward value for the offshore yuan traded at 6.7259 per dollar, indicating a 2.26% appreciation within 12 months.
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