SHANGHAI: China’s yuan weakened slightly on Monday against a firm dollar as investors weighed when the US Federal Reserve will start cutting rates in the wake of a blowout jobs report, while Beijing’s move to defend the yuan is also in focus.
Prior to market opening, the People’s Bank of China set the midpoint rate, around which the yuan is allowed to trade in a 2% band, at 7.0947 per US dollar prior to market open, firmer than the previous fix.
Monday’s midpoint was 1,283 pips firmer than a Reuters estimate of 7.2230.
The central bank continued its months-long practice of setting the rate at levels firmer than market projections, widely viewed by traders as an attempt to keep the currency stable.
In the spot market, the spot yuan opened at 7.2295 per dollar and was changing hands at 7.2336 at midday, 16 pips weaker than the previous late session close.
Yuan steady as central bank sets firmest fixing in a month
The dollar was firm in Asian trading on Monday as investors looked ahead to US inflation data after the big payrolls number last week, and as Treasury yields reached for December highs.
“In the short term, we expect USD/CNY to stay range-bound, but there are more upside than downside risks due to extended USD strength from strong US economic data and talks of tariff hikes on Chinese exports from US/EU,” said Goldman Sachs in a note.
Investor focus this week will be on the US consumer price index (CPI) report.
In China, credit data, inflation readings and trade figures are also due this week.
Analysts at broker CICC said in a note that China’s economic data may dip slightly due to higher bases, so the focus will be how the central bank will set the midpoint rate, and they expect more measures to stabilise the yuan will follow.
The global dollar index rose to 104.346 from the previous close of 104.298.
The offshore yuan was trading at 7.2488 per dollar.
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