SHANGHAI — China’s yuan steadied
against the dollar on Wednesday, as the market awaited the
Federal Reserve’s policy meeting for more clues on the
trajectory of U.S. monetary tightening.
The Fed is widely expected to raise interest rates by 25
basis points later in the session, but Fed Chair Jerome Powell’s
news conference will hog the spotlight as traders gauge how long
the Fed is likely to stay hawkish.
Prior to market opening, the People’s Bank of China (PBOC)
set the midpoint rate at a two-week high of 6.7492
per dollar, 112 pips or 0.17% firmer than the previous fix of
In the spot market, the onshore yuan opened at
6.7503 per dollar and was changing hands at 6.7514 at midday, 17
pips firmer than the previous late session close.
Some traders said the yuan’s resilience on Wednesday morning
was underpinned by fresh signs of recovery in January amid
China’s economic and border reopening.
China’s factory activity shrank more slowly in January after
Beijing lifted tough COVID curbs late last year which helped
ease pressure on manufacturers though infections among workers
hampered production, a private sector survey showed.
However, caution ahead of the Fed’s rate decision kept the
market trading narrowly within a range of around 120 pips in
morning deals, with volume also shrinking to $9.1 billion by
midday from a normal half-day volume of about $15 billion.
Other global central banks including the European Central
Bank and the Bank of England are also scheduled to announce rate
decisions, which could bring volatility to major currencies.
Separately, Premier Li Keqiang’s pledge again to keep the
yuan basically stable during his visits to the PBOC and FX
regulator this week prompted some speculation the central bank
would unwind counter-cyclical measures, which were rolled out
last year to slow the pace of yuan depreciation.
“It may be a bit early to remove the risk reserve on FX
forward purchases or any similar actions. 6.5 seems to be a more
reasonable level,” said Iris Pang, chief economist for Greater
China at ING.
“However, we cannot rule it out as the Chinese government
wants the economy to recover smoothly during the reopening
period. If there is anything that could hurt the economy at the
moment, the government is likely to try to minimize the risk.”
By midday, the global dollar index rose to 102.164
from the previous close of 102.097, while the offshore yuan
was trading at 6.7554 per dollar.
The one-year forward value for the offshore yuan
traded at 6.616 per dollar, indicating a roughly 2.11%
appreciation within 12 months.
The yuan market at 0306 GMT:
Item Current Previous Change
PBOC midpoint 6.7492 6.7604 0.17%
Spot yuan 6.7514 6.7531 0.03%
Divergence from 0.03%
Spot change YTD 2.20%
Spot change since 2005 22.59%
Item Current Previous Change
Dollar index 102.164 102.097 0.1
*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 6.7554 -0.06%
Offshore 6.6242 1.89%
*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 Brenda Goh; Editing by Jacqueline