HONG KONG: China’s yuan firmed against the dollar on Friday, as the central bank’s daily fixing reinforced investor views authorities have little tolerance for heavy slides in the currency.
However, trading has held in tight ranges as investors assess the prospects of more stimulus to support the country’s economy after premier Li Qiang said China would take measures to support growth and employment.
The People’s Bank of China set the midpoint rate at 7.2054 per US dollar prior to market open, firmer than the previous fix 7.2098. The central bank has fixed the midpoint higher than market expectations every session this week.
China’s yuan firms as central bank pledges again to stabilize currency
The spot yuan opened at 7.2400 per dollar and was changing hands at 7.2447 at midday, 42 pips stronger than the previous late session close and 0.55% weaker than the midpoint.
The spot rate is currently allowed to trade in a 2% above or below the official fixing on any given day.
“We still hold a glass half full view that a stimulus package could be unleashed after the Chinese leaders made multiple rounds of conversations held with local and foreign business leaders and foreign counterparties,” said Maybank analysts in a research note on Friday.
Some analysts are expecting these measures to be announced around the time of the Politburo meeting slated for the end of July.
Until then, the yuan should stabilise within the 7.2-7.3 per dollar range given the PBOC’s move to set stronger daily fixings will likely continue, said Kiyong Seong, lead Asia macro strategist at Societe Generale.
The global dollar index fell to 103.125 from the previous close of 103.166.
Investors are closely watching for any signals of recalibrating ties between the world’s two largest economies, after US Treasury Secretary Janet Yellen arrived in Beijing this week for meetings with Chinese officials.
Confrontation between the countries over technology export controls and planned investment restrictions has dominated headlines.
China will establish communication channels between the government and foreign and private companies to gauge views on the economic situation, state media reported on Thursday citing premier Li.
The offshore yuan was trading 0.12% weaker than the onshore spot at 7.2533 per dollar.
The one-year forward value for the offshore yuan traded at 7.0308 per dollar, indicating a roughly 3.16% appreciation within 12 months.