SHANGHAI: China’s yuan weakened on Wednesday due to the strengthened dollar’s continued pressure, despite the central bank’s strong fixing to support the currency, while better economic data also offered little help.
Prior to the market’s opening, the People’s Bank of China set the midpoint rate at 7.0946 per US dollar, weaker than the previous fix 7.0943.
The fixing came in 1,304 pips stronger than a Reuters’ estimate, underscoring PBOC’s firm attitude to support the yuan.
“A sub-7.10 fix continues to signal support for the yuan but with overnight action subdued, there is little … fresh cue on the yuan from the policy perspective,” said Maybank analysts in a note.
In the spot market, the yuan opened at 7.2158 per dollar and was changing hands at 7.2276 at midday, 126 pips weaker from the previous late session.
The dollar rose as traders waited on a fresh catalyst to give clues on Federal Reserve policy, after overnight data showed a bigger-than-expected jump in US durable goods orders in February.
Other moves in Asia were kept in check as markets wait for Friday’s release of US core inflation data.
Data showed on Wednesday that China’s industrial firms posted higher profits in the opening months of the year. But overall gains remain tempered by the persistent fragility in China’s property market, pointing to a divergence in the country’s post-pandemic recovery.
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“An improvement in market expectations of China’s growth could push up the renminbi, but that has not been forthcoming, with the latest economic data not showing much impact from policy stimulus,” said Wei He, economist at Gavekal Research.
“If the US dollar stays strong, the PBoC’s most likely course of action is to let the renminbi depreciate gradually,” he said.
Hong Kong’s offshore yuan overnight HIBOR, a gauge that measures offshore yuan liquidity conditions, jumped to 5.98379%, the highest since April 2022. Surges in the yuan’s funding costs made it more expensive for some investors to short the yuan.
The global dollar index rose to 104.372 from the previous close of 104.235. The offshore yuan was trading -0.37% away from the onshore spot at 7.2548 per dollar.