SHANGHAI: China’s yuan bounced on Friday from a near seven-week low against the dollar, as some exporters liquidated their greenback positions before an extended holiday even though the local currency is still poised to end the month with losses.
Prior to market opening, the People’s Bank of China (PBOC) set the midpoint rate at 6.924 per dollar, 33 pips softer than the previous fix of 6.9207, the weakest level since March 13.
The weaker midpoint fixing dragged the yuan’s value against its major trading partners to 99.53, the lowest level since Jan. 3.
It is still up 0.87% year-to-date.
In the spot market, the onshore yuan opened at 6.9170 per dollar and was changing hands at 6.9142 at midday, 61 pips firmer than the previous late session close.
Currency traders said the sudden yuan strength in morning deals came as some of their corporate clients rushed to lock in profits by converting their FX receipts as the yuan weakened past the psychologically important 6.9 per dollar.
The May 3 Federal Reserves policy meeting, in which the US central bank is expected to deliver another 25-basis-point rate hike, could bring higher volatility to currency markets at a time China is on long Labor Day holiday, they added.
Chinese financial markets will be closed from Saturday and reopen on May 4.
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“In the near-term, we continue to monitor news flows on the upcoming April Politburo meeting for economic policy guidance,” analysts at Maybank said in a note, referring to the quarterly Politburo meeting, when a top decision-making body of the Communist Party discusses the economy.
The world’s second biggest economy is still struggling to fully recover despite the lifting of tough COVID restrictions in December, partly owing to slowing global growth.
“Markets are still taking a wait-and-see approach, skeptical on whether China’s recovery can be sustained.”
By midday, the global dollar index rose to 101.529 from the previous close of 101.503, while the offshore yuan was trading at 6.9228 per dollar.
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