SHANGHAI/SINGAPORE: China’s yuan slipped versus the dollar on Monday, dropping to its weakest level in nearly a month, as investors await economic data from the US this week that will help gauge the Federal Reserve’s likely path on interest rates.
Still, while the yuan crossed the psychologically important 6.9 to the dollar threshold, analysts said the movement was within the range they anticipated.
Prior to the market’s opening, the People’s Bank of China set the midpoint rate at 6.8835 per US dollar, 83 pips weaker than the previous fix 6.8752.
Spot yuan opened at 6.8881 per dollar and was changing hands at 6.9031 at midday, 101 pips weaker than the previous late session close.
The USD/CNH pair remains within the 6.81-6.93 range, said Maybank analysts. “This pair needs to break out of its recently established range for greater directional cues,” they said.
Analysts from Barclays wrote in a note that “USD/CNY is likely to continue trading in its recent range of 6.80-6.90”.
They said that further weakening of the yuan could be capped by Chinese exporters’ dollar sales as they look for rates of 6.92-6.95, based on the bank’s interactions with clients.
Barclays also sees room for a stronger yuan against the dollar, depending on the Fed’s rate hike path and seasonal dividend payout conversion.
Market participants will monitor US economic data coming out this week for clues on the Fed’s monetary path ahead of their official meeting next week.
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By midday, the global dollar index was steady at 101.816 compared with the previous close of 101.822.
The offshore yuan was trading 54 pips away from the onshore spot at 6.9085 per dollar.
The one-year forward value for the offshore yuan traded at 6.74 per dollar, indicating a roughly 2.50% appreciation within 12 months.