SHANGHAI: China's yuan on Monday inched up against the dollar, which slipped globally, and some corporate clients sold the U.S unit ahead of the latest round of US-China trade talks.
United States Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin will travel to Beijing for talks scheduled to start on March 28, while a Chinese delegation led by Vice Premier Liu He will visit Washington next week, the White House said on Saturday.
Traders said the talks remain a key factor affecting market sentiment, and any news suggesting progress will be positive for the yuan.
Prior to the market opening on Monday, the People's Bank of China (PBOC) set the midpoint rate at 6.7098 per dollar, 154 pips or 0.23 percent weaker than the previous fix of 6.6944.
In the spot market, onshore yuan opened at 6.7200 per dollar and was changing hands at 6.7138 at midday, 42 pips firmer than the Friday late session close.
Some market participants said although the spot yuan was trading slightly higher in morning session, it is vulnerable to swinging due to uncertainty in the dollar's movements and worries over a global economic slowdown.
The dollar eased as the spread between 3-month Treasury bills and 10-year note yields inverted for the first time since 2007. Historically, an inverted yield curve has signalled an impending recession.
"Overseas markets are trying to figure out the global economic downturn," said a trader at a Chinese bank.
"In domestic market, one of the variable could be changes to the currency policy. And everyone is nervous," he added.
On Monday, PBOC Vice Governor Pan Gongsheng reiterated at a forum China's pledge to keep the yuan exchange rate basically stable at reasonable and balance levels, according to local media.
Pan also quoted as saying that China will continue to push forward with the convertibility of its capital account, while not pursuing a goal of current account surplus.
Stephen Chiu, FX and rates strategist at China Construction Bank (Asia) in Hong Kong, noted that markets will pay attention to top officials' remarks at Boao Forum for Asia this week, where Premier Li Keqiang is likely to talk about tax cuts, targeted easing measures to support the economy.
Chiu expects the both onshore and offshore yuan to trade in a range of 6.68 to 6.74 per dollar this week. The global dollar index fell to 96.621 at midday, from the previous close of 96.651. The offshore yuan was trading at 6.72 per dollar as of midday.
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