SHANGHAI — China’s yuan edged lower
against the dollar on Friday but is on track to post its biggest
weekly gain in two years, buoyed by expectations of a slower
pace in U.S. rate hikes and China’s gradual exit from its
Traders expect the yuan’s recovery to be slow next year,
however, despite signs of the dollar peaking, as China will
likely keep interest rates low, while some foreign investors may
hesitate to return to China assets due to geopolitical tensions.
The onshore yuan was changing hands around 7.0580
per dollar in late morning trade, a tad weaker than the previous
late session close.
Prior to the market open, China’s central bank set the
midpoint rate at 7.0542 per U.S. dollar, a two-week
For the week, the yuan has gained roughly 1.5%, while the
dollar index fell to a 3-1/2 month low amid signs the
U.S. Federal Reserve will pivot away from rapid rate hikes as
The Chinese currency has been bolstered by Beijing’s latest
measures to stabilize the wobbly property market, and by signs
the government is preparing for an exit from strict
China will allow some individuals who test positive for
COVID to quarantine at home, among supplementary measures to be
announced in coming days, two sources with knowledge of the
matter told Reuters on Thursday.
“CNY rates are firmly on an upward trajectory while USD
rates appear to have peaked, suggesting that China-U.S. rate
differentials have bottomed,” DBS wrote in a note to clients.
That view was echoed by HBSC.
“The broad USD trend could shift once the Fed ends its
hiking cycle, mitigating volatility and improving the outlook
for EM FX,” HSBC wrote in an outlook report.
“We also assume China will pull through its economic and
However, HSBC expects the yuan’s recovery to be slow, and
“Inflows from some foreign investors in the West may return
only gradually given lingering concerns about COVID-19 policy,
geopolitical tensions and ESG matters,” the bank said.
“Mainland China’s interest rates will likely stay low for
some time to foster a sustainable recovery in the economy, and
as such, interest rate arbitrage activities among locals may
The yuan market at 3:23AM GMT:
Item Current Previous Change
Spot change YTD
Spot change since 2005
*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% from official midpoint rate it sets each
OFFSHORE CNH MARKET
Instrument Current Difference
Offshore spot yuan
* 7.057 0.03%
non-deliverable 6.888 2.41%
*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 Shanghai newsroom; Editing by Edmund Klamann)