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China’s yuan climbs to week high after expected Fed move

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SHANGHAI — China’s yuan climbed to a near

one-week high against the dollar on Thursday, after the Federal

Reserve delivered its biggest rate hike in decades but flagged

that such an outsized increase would not be common.

The dollar eased from a 20-year high against a basket of

currencies after the U.S. central bank approved its

biggest interest rate hike since 1994, lifting the target

federal funds rate by a widely expected 75 basis points to a

range of between 1.5% and 1.75%.

“FOMC decision overnight, while hawkish, helped remove some

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uncertainty in terms of expected Fed policy path,” analysts at

Maybank said in a note.

Prior to market opening, the People’s Bank of China (PBOC)

set the midpoint rate at 6.7099 per dollar, 419 pips

or 0.6% firmer than the previous fix 6.7518.

In the spot market, onshore yuan opened at 6.6956

per dollar and was changing hands at 6.7006 at midday, 152 pips

firmer than the previous late session close.

“Fed Chairman Powell’s comments after the rate hike decision

was rather dovish, and that pressured the dollar and supported

the yuan,” said a trader at a Chinese bank.

Some currency traders and analysts said recent signs of

economic recovery from COVID-19 lockdowns, as suggested by a

slew of better-than-expected data, including credit lending and

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activity indicators, continued to lend some support for the

yuan.

“The Chinese economy is likely to further recover and

recover at a stronger pace towards the end of this year,” said

Li Lin, head of global markets research for Asia at MUFG Bank.

“With uncertainties still at large in the near term, we

maintain our view that USD/CNY will be rangebound around 6.70

level for the rest of Q2, and we expect USD/CNY to decline to

6.64 by the end of 2022 on a gradual and persistent recovery in

the Chinese economy, along with a weaker dollar in H2.”

The yuan market at 0403 GMT:

ONSHORE SPOT:

Item Current Previous Change

PBOC midpoint 6.7099 6.7518 0.62%

Spot yuan 6.7006 6.7158 0.23%

Divergence from -0.14%

midpoint*

Spot change YTD -5.16%

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Spot change since 2005 23.52%

revaluation

Key indexes:

Item Current Previous Change

Thomson 101.9 101.77 0.1

Reuters/HKEX

CNH index

Dollar index 104.952 105.158 -0.2

*Divergence of the dollar/yuan exchange rate. Negative number

indicates that spot yuan is trading stronger than the midpoint.

The People’s Bank of China (PBOC) allows the exchange rate to

rise or fall 2 percent from official midpoint rate it sets each

morning.

OFFSHORE CNH MARKET

Instrument Current Difference

from onshore

Offshore spot yuan 6.705 -0.07%

*

Offshore 6.6997 0.15%

non-deliverable

forwards

**

*Premium for offshore spot over onshore

**Figure reflects difference from PBOC’s official midpoint,

since non-deliverable forwards are settled against the midpoint.

.

(Reporting by Winni Zhou and Andrew Galbraith; Editing by

Jacqueline Wong)

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