Yuan creeps higher as dollar wobbles ahead of Jackson Hole

08/19/2024

2 minutes read

2024.08.19 01:20

SINGAPORE (Reuters) – The yuan gained on Monday along with other Asian currencies as investors wagered that U.S. rate cuts will begin within a month, implying an end to a long rally in the dollar.

It climbed as far as 7.1437 per dollar during morning trade and was last about 0.2% firmer at 7.1444.

After months pinned to the low end of its daily trading band as China’s economic outlook has darkened, the yuan has rebounded to hit the middle of the range over the last few weeks, mostly because the dollar has weakened.

At the same time a massive shakeout of short bets against the Japanese yen has also dragged on the dollar.

However, a slew of disappointing Chinese economic data, including July figures showing the slowest loan growth in 15 years and continued falls in home prices, has analysts expecting the yuan’s bounce against the dollar may have run its course.

“The weak prospects for the Chinese economy and expectations for additional monetary policy easing will undermine investor confidence on Chinese assets and in turn reduce demand for the yuan,” said analysts at the Commonwealth Bank of Australia (OTC:).

The yuan “is unlikely to benefit much from a decline in the USD driven by an improving global economy,” they added.

Against a basket of trading partners’ currencies the yuan hit 98.07, the lowest level since Jan. 15, according to Reuters calculations from official data.

was about 0.2% firmer at 7.1463 per dollar at 0330 GMT.

Global markets are in a holding pattern ahead of a Friday speech by Federal Reserve Chair Jerome Powell at Jackson Hole where he is expected to make the case for interest rate cuts.

Chinese government yields fell 0.6 basis points to 2.18%. The yield on similar U.S. government benchmark debt was 3.9%.

The yuan onshore 7-day benchmark repo rate was at 1.74% and in the forwards market, three-month yuan was quoted at 7.0739, 736 pips stronger than the spot rate. Three-month CNH forwards were quoted at 7.0744 per dollar.

The People’s Bank of China set the midpoint rate, around which the yuan is allowed to trade in a 2% band, at 7.1415 per dollar on Monday, 133 pips firmer than a Reuters’ estimate.Key onshore vs offshore levels: * Overnight dollar/yuan swap onshore -7.17 pips vs. offshore-7.17 * Three-month SHIBOR 1.8% vs. 3-month CNH HIBOR 2.2%

LEVELS AT 03:35 GMT

INSTRUMENT CURRENT UP/DOWN(-) % CHANGE DAY’S HIGH DAY’S

vs USD VS. PREVIOUS YR-TO-DATE LOW

CLOSE %

Spot yuan 7.1475 0.25 -0.64 7.1445 7.1585

CNY=CFXS