China’s yuan touches 1-week high after Biden and Xi hold second phone call

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SHANGHAI — China’s yuan touched a

one-week high against the dollar on Friday and looked set for

its third straight weekly gain after U.S. President Joe Biden

and his Chinese counterpart Xi Jinping

discussed the need to manage competition between their countries

and avoid conflict.

Relations between Washington and Beijing have been at their

lowest point in decades and it was only the second call between

the leaders since Biden took office in January. The conversation

focused on economic issues, climate change and COVID-19, a

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senior U.S. official said.

“Signs of willingness to nudge bilateral conversations onto

a more serious path could be a net positive for regional risk

assets, but spillovers to sentiments could be constrained

without more discernible translation to policy changes,”

analysts at Maybank said in a note.

Prior to the market opening, the People’s Bank of China set

the midpoint rate at 6.4566 per dollar, 49 pips or

0.08% firmer than the previous fix of 6.4615.

In the spot market, the onshore yuan opened at

6.4552 per dollar and was changing hands at 6.4472 at midday, 88

pips firmer than the previous late session close.

If the yuan finishes the late night session at the midday

level, it would have gained 0.18% to the dollar for the week,

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booking the third straight winning week in a row.

While Chinese markets have grown somewhat used to strained

Sino-U.S. ties over trade and a host of other issues over the

past few years, news of the leaders’ phone call supported

sentiment.

“Overall it is a good sign,” said a trader at a Chinese

bank.

However, some market participants also noted that a breach

of the psychologically important 6.45 per dollar level has

triggered dollar demand from both corporate clients and banks’

proprietary accounts to limit the gains in the yuan.

Markets are now awaiting China’s August credit and activity

data in the coming week for more clues on the health of the

economy. While exports beat analysts’ forecasts and lending is

seen rebounding, industrial output and retail sales growth are

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expected to weaken further, adding to the debate over whether

more stimulus is needed.

In global markets, the dollar headed for its first winning

week in three, after rebounding from a payrolls-induced

sell-off, as investors continued to ponder the timing of a

tapering of Federal Reserve stimulus.

By midday, the global dollar index fell to 92.486

from the previous close of 92.532, while the offshore yuan

was trading at 6.4418 per dollar.

The yuan market at 0401 GMT:

ONSHORE SPOT:

Item Current Previous Change

PBOC midpoint 6.4566 6.4615 0.08%

Spot yuan 6.4472 6.456 0.14%

Divergence from -0.15%

midpoint*

Spot change YTD 1.26%

Spot change since 2005 28.37%

revaluation

Key indexes:

Item Current Previous Change

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Thomson 98.89 98.82 0.1

Reuters/HKEX

CNH index

Dollar index 92.486 92.532 -0.1

*Divergence of the dollar/yuan exchange rate. Negative number

indicates that spot yuan is trading stronger than the midpoint.

The People’s Bank of China (PBOC) allows the exchange rate to

rise or fall 2% from official midpoint rate it sets each

morning.

OFFSHORE CNH MARKET

Instrument Current Difference

from onshore

Offshore spot yuan 6.4418 0.08%

*

Offshore 6.6221 -2.50%

non-deliverable

forwards

**

*Premium for offshore spot over onshore

**Figure reflects difference from PBOC’s official midpoint,

since non-deliverable forwards are settled against the midpoint.

.

(Reporting by Winni Zhou and Andrew Galbraith; Editing by Kim

Coghill)

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