HONG KONG: China’s yuan eased against the dollar on Tuesday, defying wider gains in Asian currencies as foreign dividend payments and prevailing economic concerns offset any lift from broad greenback weakness.
Prior to the market open, the People’s Bank of China set the midpoint rate, around which the yuan is allowed to trade in a 2% band, at 7.1083 per US dollar prior to market open, the strongest level since May 22.
In the spot market, the onshore yuan opened at 7.2400 per dollar and was changing hands at 7.2456 at midday, 43 pips weaker than the previous late session close and 1.93% away from the midpoint.
A raft of recent property easing measures has failed to attract sustained capital inflows, analysts say.
“Bouts of northbound equity inflows related to property policy tailwinds have not been sustained beyond a few days,” HSBC analysts said in a note, referring to funds moving into the mainland from Hong Kong.
In contrast, China’s onshore demand for foreign exchange and demand for offshore equity investment via the southbound link are more persistent, they said, resulting in outflows.
China’s blue-chip CSI 300 index has shown signs of fatigue in recent weeks after a rebound from five-year lows struck in February.
China’s yuan extends losses after five straight months of declines
The yuan was also weighed down by overseas-listed Chinese companies’ seasonal demand for foreign exchange to fulfill dividend payouts, which requires selling yuan.
Market participants now await US economic data including ISM services PMI on Wednesday and nonfarm payrolls on Friday for US rate path clues.
The yuan is down 2.1% this year, pressured by relatively low yields versus other currencies and China’s monetary policy divergence with other countries.The global dollar index fell to 104.08 from the previous close of 104.14.
The offshore yuan was trading -0.16% away from the onshore spot at 7.2573 per dollar.