China's yuan steadies, US jobs and French election in focus

[SHANGHAI] China's yuan was steady against the US dollar on Friday, with sentiment improving on firmer signals from the authorities and as investors trimmed bearish bets on the Chinese currency.

The People's Bank of China set the midpoint rate at 6.8884 per US dollar prior to market open, firmer than the previous fix of 6.8957.

Friday's fixing was around 50 pips stronger than some institutions' models had suggested. Traders said Thursday's fixing was also around 80 pips higher compared with their forecasts.

The stronger-than-expected guidance rates might have been a result of the midpoint fixing mechanism, traders said, which eliminates some of the highest and lowest quotes from contributors.

Multiple market participants said the authorities have been sending a clear signal about a stabilising yuan to the market by fixing the yuan midpoint slightly stronger.

"Recent (USD/CNY) midpoint fixings showed some downside bias," said a trader at a foreign bank in Shanghai.

In the spot market, the yuan opened at 6.8930 per US dollar and was changing hands at 6.8957 at midday, only one pip softer than the previous late session close and 0.11 per cent weaker than the midpoint.

For the week, the yuan was flat against the US currency.

In a Reuters poll this week, the yuan was forecast to weaken to 7.07 per US dollar in a year.

Investors have increased their bullish bets on the Chinese yuan compared with two weeks ago, a separate Reuters poll showed on Thursday, in part bolstered by stronger emerging market currencies rallying on investor relief the French elections seem to be going in favour of the market's preferred candidate. The run-off second round vote is on May 7.

Independent centrist candidate Emmanuel Macron appeared to cement his position as favourite for the French presidency on Thursday as the dust settled on a rancorous final televised debate with far-right rival Marine Le Pen.

Markets are also looking to US non-farm payrolls figures later on Friday and China's April foreign exchange reserves data expected on Sunday.

Economists polled by Reuters had expected foreign exchange reserves to rise by US$11 billion to US$3.02 trillion in April.

The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 93.95, weaker than the previous day's 94.07.

The global US dollar index fell to 98.789 from the previous close of 98.797.

The offshore yuan was trading 0.02 per cent weaker than the onshore spot at 6.8968 per US dollar.

Offshore one-year non-deliverable forwards contracts (NDFs), considered the best available proxy for forward-looking market expectations of the yuan's value, traded at 7.0985, 2.96 per cent weaker than the midpoint.

One-year NDFs are settled against the midpoint, not the spot rate.

REUTERS