China's yuan rises to near one-week high, market focuses on Politburo meeting
- The spot yuan is allowed to trade 2% either side of the fixed midpoint each day
SHANGHAI: China’s yuan rose to a near one-week high against the dollar on Monday as risk appetite improved following a halt in US-Iran attacks, while investors also turned their attention to a key policy meeting later this week.
The dollar slumped after the US paused its bombing campaign in Iran during the weekend, prompting a drop in oil prices and boosting global investor confidence.
Prior to the market opening, the People’s Bank of China (PBOC) set the midpoint rate at 6.7911 per dollar, 28 pips firmer than the previous fix on Friday. The spot yuan is allowed to trade 2% either side of the fixed midpoint each day.
“The relatively stable fix suggests the PBOC remains comfortable allowing measured two-way moves, without encouraging a sharper yuan appreciation,” said Christopher Wong, FX strategist at OCBC Bank.
“Broader USD moves, risk sentiments remain important drivers, while China’s large external surplus and potential exporter USD selling offered some underlying support.”
Wong expects the yuan to be range-bound in the near term, with the midpoint anchoring “the pace of moves rather than providing a strong directional cue.”
In the spot market, the onshore yuan touched a high of 6.7661 per dollar, the strongest level since July 21, before changing hands at 6.7695 as of 0319 GMT.
Its offshore counterpart fetched 6.7701 per dollar.
Investors are shifting their attention to an upcoming meeting of the Communist Party’s Politburo, the country’s top decision-making body, expected around the end of July.
Policymakers are expected to set the economic policy agenda for the second half of the year, which could affect the yuan’s outlook, currency traders said.
“Given unused on-budget fiscal quota and quasi-fiscal measures announced, we expect policymakers to focus on implementing existing measures rather than unveiling a large-scale stimulus package,” analysts at Barclays said in a note.
“We therefore expect the market to scale back expectations for significant new easing or major policy surprises from the upcoming July Politburo meeting.”