HONG KONG: The yuan dropped slightly on Tuesday as reduced appetites for risk in global markets saw the U.S. dollar edge up, but losses were small as investors showed caution before China unveils its first quarter growth number.
Global investors pushed the dollar index, an outperformer when risk appetite shrinks, above 97 in early Asia trade for the first time since Friday. It was 96.942 at midday.
Prior to Tuesday's market opening, the People's Bank of China set the yuan midpoint rate at 6.7097, firmer than the previous fix of 6.7112.
Spot yuan traded at 6.7098 per dollar at midday, 13 pips weaker than the previous late session close and just 1 pip softer than Tuesday's midpoint rate.
"There is no trigger for the yuan to go in either direction right now," a Shanghai-based trader with a foreign bank said China, the world's second largest economy, will report first-quarter economic growth pace on Wednesday.
A Reuters poll showed that growth likely cooled to 6.2 percent, which would be the weakest pace in at least 27 years, though a flurry of measures to boost domestic demand may have put a floor under slowing activity in March.
Hopes for stronger policy support were somewhat dampened after the Chinese central bank on Monday reiterated its pledge to continue prudent monetary policy, and repeated that Beijing will not resort to "flood-like" stimulus.
Even if first-quarter growth turns out to be higher than expected, support for the yuan looks limited as investors in yuan-denominated assets may use the opportunity take profit, said Ken Cheung, senior Asian FX strategist at Mizuho.
"If proved to remain strong, (China GDP) might not boost sentiment further," he wrote in a note on Tuesday.
The Sino-U.S. trade talks continue be a market focus market, said a trader based in Shanghai who expects the yuan remain around 6.7 to the dollar until there's more news on their outlook.
The two sides will carry on negotiations via phone this week, U.S. Treasury Secretary Steven Mnuchin said on Saturday.
The official said he is hopeful the two countries are "getting close to the final round of concluding issues."
The offshore yuan was trading 0.01 percent weaker than the onshore spot at 6.7102 per dollar.
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