SHANGHAI: China’s yuan edged lower against a stronger dollar on Thursday, the first trading day after the week-long National Day holiday, as a firmer-than-expected midpoint fixing from the central bank offset broad strength in the greenback.
Markets on the mainland resumed trading after an eight-day holiday and investors caught up with moves in overseas markets, as the greenback looked set for the best weekly performance in nearly a year.
By 0328 GMT, the onshore yuan was 0.09% lower at 7.1276 per dollar, while its offshore counterpart traded at 7.1310.
Prior to market opening, the People’s Bank of China (PBOC) set the midpoint rate at 7.1102 per dollar, its weakest since September 26. The spot yuan is allowed to trade 2% either side of the midpoint each day.
Thursday’s midpoint was 382 pips firmer than a Reuters’ estimate of 7.1484, the widest gap since August 28. Traders and analysts interpreted the firmer-than-expected fix as an official attempt to keep the currency stable.
Despite data showing increased trips during the holiday period compared with a year earlier, “the overall travel situation during the National Day holiday may be worse than that during the Labour Day holiday,” Nanhua Securities analysts said in a note.
“The key to economic recovery still needs to focus on the demand side.”
Investor focus is expected to shift to the upcoming Fourth Plenum, scheduled for October 20-23, which will outline China’s economic, political and social agenda as well as its development plans for the next five years.
“The authorities may see the next five years as a good window to promote the use of renminbi in international trade and investment and making yuan assets more investible,” analysts at Standard Chartered said in a note, referring to the Chinese currency’s official name.
“We also expect China to explore alternative channels for cross-border payment, supported by Hong Kong as the key offshore financial centre.”
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