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China’s yuan steadies ahead of Fed decision

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SHANGHAI — China’s yuan steadied

against the dollar on Wednesday, as the market awaited the

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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

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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

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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

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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%

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Spot change since 2005 22.59%


Key indexes:

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



Instrument Current Difference

from onshore

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



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