China's yuan weakens, but still set to end the week stronger

[HONG KONG] China's yuan weakened against the US dollar on Friday as the global US dollar index rose overnight, but the Chinese currency is set to end stronger for the week.

The People's Bank of China set the midpoint rate at 6.8845 per US dollar prior to market open, firmer than the previous fix 6.8856.

The spot market opened at 6.8875 per US dollar and was changing hands at 6.8924 at midday, 64 pips weaker than the previous late session close and 0.11 per cent weaker than the midpoint.

The spot rate is currently allowed to trade with a range 2 per cent above or below the official fixing on any given day.

"We saw some demand to buy dollars, but generally speaking, the yuan has been kept quite stable recently," said a trader at a Chinese bank in Shanghai.

"The offshore yuan has been trading stronger than the onshore counterpart, suggesting that overseas investors'expectation of the yuan is stablised at present," the trader said.

The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 94.26, weaker than the previous day's 94.27.

The global US dollar index rose to 99.926 from the previous close of 99.76.

The US dollar was buffeted this week as investor expectations that US President Donald Trump would be able to push through pro-growth measures were overturned by the president's uphill struggle to fulfil his campaign promise to "repeal and replace" Obamacare. A vote on the healthcare bill is expected to take place later in the global day.

The offshore yuan was trading 0.19 per cent stronger than the onshore spot at 6.8796 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 7.088, or 2.87 per cent weaker than the midpoint.

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

REUTERS