SHANGHAI: China’s yuan eased slightly against the US dollar on Friday as its new home prices fell for the seventh straight month, while market participants are also watching the 2024 US presidential election for clues on the direction of the yuan during the year.
China’s January new home prices fell, official data showed on Friday, even as policymakers stepped up support to restore confidence in the debt-ridden property sector.
Meanwhile, the 2024 US election has drawn market participants’ attention as it may have an impact on the yuan starting in mid-2024.
“The Trump factor in the FX market has started to make itself felt with the ratio of USD/CNH 9-month implied volatilities to either 6-month or 3-month volatilities breaking to the highest levels since before the pandemic,” said Alvin Tan, head of Asia FX strategy at RBC Capital Markets.
“There is still not much impact on the spot FX market, but the Trump factor could start to be a factor to support USD/Asia pairs starting in mid-2024,” Tan said.
Prior to the market’s opening, the People’s Bank of China set the midpoint rate, around which the yuan is allowed to trade in a 2% band, at 7.1064 per US dollar, 46 pips weaker than the previous fix 7.1018.
The spot yuan opened at 7.1925 per dollar and was changing hands at 7.1963 at midday, 26 pips weaker than the previous late session close.
Recent moves in China’s stock market are also weighing on the yuan’s sentiment.
China’s Shanghai SE Composite Index rose above the psychologically key 3000-point mark in early trades, before entering the midday break roughly flat. Beijing has rolled out a raft of measures to prop up its ailing stock market.
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