SHANGHAI: China’s yuan held firm against the dollar on Monday, as a pickup in seasonal foreign exchange settlements by corporates offset greenback strength after robust US jobs data bolstered investor bets on higher interest rates in the world’s largest economy.
The dollar was underpinned after US job growth accelerated in October and the unemployment rate fell, suggesting that the labor market could be strengthening after stumbling in mid-summer and keeping the Federal Reserve on track to raise interest rates in December.
The onshore yuan inched up 0.03 percent to 6.6746 per dollar as of 0255 GMT, while its offshore counterpart was largely flat at 6.6726.
Companies were taking advantage of a recent pullback in the yuan to front-load some of their year-end dollar sales, a trader at a Chinese bank said, referring to the central bank’s decision last week to raise the amount of foreign exchange that financial institutions must hold in reserve. The market interpreted the move as an attempt to slow the yuan’s gains.
Prior to the market opening, the People’s Bank of China (PBOC) set the midpoint rate at 6.7188 per dollar, its weakest since October 22 and 389 pips weaker than a Reuters estimate. The spot yuan is allowed to trade a maximum of 2 percent either side of the fixed midpoint each day.