Yuan ends at 2-month high on firmer guidance, policy support for property sector
CHINA’S yuan finished the domestic trading session at a near two-month high against the dollar on Monday (Nov 14), after the central bank lifted its official guidance fixing by the most since 2005, when Beijing abandoned the currency’s decade-old peg against the greenback.
The onshore yuan ended at 7.0378 per dollar, the strongest such close since Sep 20, firming 557 pips or 0.8 per cent from the previous late night close of 7.0935 on Friday.
Its offshore counterpart followed suit to touch 7.0200 per dollar, its strongest since Oct 5, before settling back to trade at 7.0360 by around 0830 GMT.
The yuan’s rally coincides with a broad lift in Chinese market sentiment on official moves to help the embattled property sector and the government’s decision to ease some of the country’s strict Covid-19 prevention controls.
Covid disruptions and the troubled property sector have long been considered by China observers as the two main drags on the world’s second-largest economy.
Prior to market opening, the People’s Bank of China (PBOC) set the midpoint rate at 7.0899 per dollar, 1,008 pips or 1.42 per cent firmer than the previous fix of 7.1907.
Monday’s official midpoint – the strongest since Sep 27 – was the biggest one-day strengthening since the currency reform in July 2005, when China revalued its currency by 2.1 per cent and revised rules governing the yuan.
Currency traders said the much strengthened midpoint fixing opened upside room for the yuan.
“Investors rushed to cover their short yuan positions,” said a trader at a foreign bank.
Ken Cheung, chief Asian FX strategist at Mizuho Bank, said uncertainties around the economic recovery will determine the yuan’s direction.
“We will certainly see some improvements in economic data, but the extent is very uncertain,” he said.
Separately, some market attention will be shifted to a meeting between the leaders of China and the United States.
Chinese leader Xi Jinping arrived on Monday on the Indonesian island of Bali, where he was due for talks with US President Joe Biden ahead of a Group of 20 (G20) summit that is expected to be fraught with tension over Russia’s invasion of Ukraine.
“The meeting is about maintaining communication and both sides are likely to be cordial at the heads-of-state level, and no breakthroughs are expected,” said Alvin Tan, Asia FX strategist at RBC Capital Markets. REUTERS
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