Yuan inches up as dollar slips at the start of an event-packed week

[SHANGHAI] China's yuan on Monday inched up against the US dollar, which eased in global markets at the start of an event-packed week. The dollar slipped against a basket of major currencies after a G-7 meeting ended in disarray and before policy meetings of the Federal Reserve and the European Central Bank.

Another market focus is a historic summit between US President Donald Trump and North Korean leader Kim Jong Un on Tuesday.

Most traders do not expect the Chinese currency to be directly affected by that meeting, though Johnny Chen, a portfolio manager at NN Investment Partners in Singapore, said positive developments on the Korean peninsula "will likely strengthen the yuan, as Asian currencies would likely broadly strengthen against the dollar".

Prior to Monday's market opening, the People's Bank of China (PBOC) set the yuan's midpoint rate at 6.4064 per dollar, 61 pips or 0.1 per cent weaker than Friday's fix of 6.4003.

In the spot market, onshore yuan opened at 6.4059 per dollar and was changing hands at 6.4053 at midday, 37 pips stronger than the previous late session close. The offshore yuan was 0.06 per cent firmer than the onshore spot at 6.4017 per dollar as of midday.

The onshore yuan swung in a thin range of less than 40 pips on Monday morning, with volume also shrinking to US$10.066 billion as of midday. Friday's full-day volume was US$33.319 billion.

"USD/CNY and USD/CNH are expected to fluctuate around 6.40 at the moment, continuing to run a relatively tight correlation with the euro," Gao Qi, FX strategist at Scotiabank said in a note on Monday. "The yuan could continue outperforming a basket of currencies amid risk-off sentiment and benefit from the euro's potential strength to some extent," he added, noting the PBOC no longer adopts a persistent weakening bias in its fixings.

The yuan last week firmed 0.16 per cent against the dollar and was largely flat on a trade-weighted basis against a basket of trading partners' currencies, according to official data from the China Foreign Exchange Trade System (CFETS).

The index, published on a weekly and monthly basis, stood at 97.30 on Friday, CFETS said on its website.

The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 97.93, weaker than Friday's 97.94. The global dollar index fell to 93.494 from the previous close of 93.551.

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 6.507, or 1.55 per cent weaker than the midpoint.

REUTERS