HONG KONG: China’s yuan firmed against the US dollar on Friday , supported by the central bank continuing to set a higher-than-expected guidance and on hopes for more measures to shore up a faltering economy.
The People’s Bank of China (PBOC) set the official midpoint rate at 7.1338 per US dollar prior to market open, weaker than the previous fix at 7.1265, but still over 300 pips firmer than the market had projected.
That extended a month-long effort by the PBOC to set a stronger-than-forecast midpoint, in moves the market has interpreted as authorities’ discomfort with a faltering yuan.
DBS expects authorities to continue to use measures such as a stronger daily fixing to keep the yuan stable, as policymakers decide on how best to address slowing growth.
“The yuan has largely stablised amid a string of strong fixings. We expect the yuan stability to be maintained to avoid outflow risks,” said DBS analysts in a morning note on Friday. It expects the yuan to hover between 7.12 to 7.18 level.
The spot yuan opened at 7.1697 per dollar and was changing hands at 7.1564 at midday, 136 pips stronger than the previous late session close and 0.32% weaker than the midpoint.
Investors also remained hopeful of more specific measures to reinvgorate the ailing property sector, which accounts for about a quarter of China’s economy. At the Politburo meeting on Monday China top policymakers hinted at more easing measures for the sector.
China’s yuan touches 2-week high after Fed rate decision
The hopes were given a boost after Ni Hong, minister of housing and urban-rural development, was quoted by state media Xinhua as saying on Thursday that China needs more effective measures such as lower home mortgage rates and down payment ratios to help spur home purchases.
“Sentiments have improved as investors are expecting more specific implementation measures to be forthcoming from the authorities, following the broad direction given at the Politburo meeting,” said Khoon Goh, head of Asia research at ANZ.
The global dollar index fell to 101.716 from the previous close of 101.773.
The offshore yuan was trading 0.01% weaker than the onshore spot at 7.1569 per dollar.
The one-year forward value for the offshore yuan traded at 6.9376 per dollar, indicating a roughly 3.16% appreciation within 12 months.