China's yuan softens again, further gains may be limited
By Summer Zhen
HONG KONG, Aug 28 (Reuters) -China's yuan is poised for a third day of decline against the dollar on Wednesday, with analysts citing a risk-off mood ahead of U.S. data and economic challenges at home that could limit further gains.
The U.S. dollar index .DXY edged firmer in early trade, while the foreign exchange market was subdued as traders awaited the U.S. Federal Reserve's preferred inflation measure - the personal consumption expenditures (PCE) index - due Friday, for hints on the size of a potential rate cut.
By 0401 GMT, the yuan CNY=CFXS was 0.07% weaker at 7.1290 to the dollar after trading in a range of 7.1215 to 7.1319.
The yuan is up 1.3% against the dollar this month, mainly driven by the dollar's slide in anticipation of U.S. rate cuts.
UOB FX analysts expected that offshore yuan will trade within a range of 7.1150 and 7.1350 in the near term, as the downward pressure on the dollar appears to have eased.
Maybank analysts said in a note it was difficult to predict whether the dollar could depreciate further, suggesting that Fed rate cut expectations could be pared back if U.S. data, particularly employment figures, do not decline sufficiently to warrant aggressive rate cuts.
Having nearly recovered its first half-year losses, market participants believe the People's Bank of China is subtly working to stop the yuan from appreciating too rapidly.
"Given China's weak economy, the People's Bank of China may further ease policy and has less urgency to push the yuan higher," DBS (Hong Kong) analysts said in a note.
Prior to market opening, the central bank set the midpoint rate CNY=PBOC, around which the yuan is allowed to trade in a 2% band, at 7.1216 per dollar, 6 pips weaker than a Reuters' estimate.
The offshore yuan traded at 7.131 yuan per dollar CNH=, down about 0.14% in Asian trade.
The dollar index =USD, tracking six major currencies, was up 0.119% at 100.72.
Key onshore vs offshore levels:
Overnight dollar/yuan swap onshore -10.00 pips vs. offshore -10.00
Three-month SHIBOR SHIBOR= 1.9 % vs. 3-month CNH HIBOR 2 %
LEVELS AT 04:00 GMT GMT
INSTRUMENT | CURRENT vs USD | UP/DOWN(-) VS. PREVIOUS CLOSE % | % CHANGE YR-TO-DATE | DAY'S HIGH | DAY'S LOW |
Spot yuan <CNY=CFXS | 7.129 | -0.05 | -0.38 | 7.1215 | 7.1319 |
Offshore yuan spot CNH=D3 | 7.1311 | -0.14 | -0.08 | 7.1205 | 7.1339 |
Reporting by Summer Zhen; Editing by Jacqueline Wong
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
