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Yuan firms, US dollar steady as French presidential election approaches
[SHANGHAI] China's yuan firmed against the US dollar on Friday, despite a weaker midpoint set by the central bank, but gains were limited as traders took a cautious approach to the first round of France's presidential election on Sunday.
The Chinese currency has treaded water this week, gaining less than 0.1 per cent against the US dollar so far, and was unfazed by US President Donald Trump's decision overnight to investigate imported steel.
The People's Bank of China set the midpoint at 6.8823 per US dollar on Friday, a touch weaker than the previous fix of 6.8792. In the spot market, the yuan opened at 6.8845 per US dollar. It was trading at 6.8802 at midday, 38 pips stronger than the previous late session close and 0.03 firmer per cent than the midpoint.
The market was eager to know the outcome of the first round of the French presidential election on Sunday, said a trader from a Chinese bank in Shanghai, adding that global volatility would spread to the yuan if the euro reacted strongly.
French centrist Emmanuel Macron was set to win the first round as far-right leader Marine Le Pen fell further behind him, an Elabe poll showed.
"Since the euro carries a big weight in the US dollar index, it will affect the US dollar a lot if the currency sours or plummets. And that will affect the yuan," the trader said.
The global dollar index was barely changed at midday, having risen to 99.819 from the previous close of 99.778.
Mr Trump on Thursday launched a trade probe against global steel exporting countries including China, the world's largest, raising the possibility of new tariffs and sending shares of some US steel makers up over 8 per cent.
But Chinese markets shrugged off the plan.
"Industry-specific comments from Trump won't have much impact on the yuan, not even on things as influential as him saying the US dollar is too strong," the trader said.
Chinese steel shares ended the morning trading session mixed.
The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 94.14, firmer than the previous day's 94.08.
The offshore yuan was trading near the onshore spot at 6.8805 per US dollar.