SHANGHAI — China’s yuan strengthened
against the dollar on Friday, reversing two days of losses,
recovering after bond market woes ebbed and higher seasonal
corporate demand for the local currency lent support.
The government bond market stabilized on Friday after
posting its worst single-day selloffs in two years earlier this
week, with risk appetite boosted amid rising expectations that
China will gradually ease its strict COVID-19 restrictions and
official moves to support the troubled property sector.
Prior to the market’s opening, the People’s Bank of China
(PBOC) set the midpoint rate at a week-low of 7.1091
per dollar, 436 pips or 0.6% weaker than the previous fix of
In the spot market, the onshore yuan opened at
7.1318 per dollar and was changing hands at 7.1255 at midday,
296 pips firmer than the previous late session close.
Despite the gains on Friday, the local currency is on course
for its first weekly loss in three, falling about 0.4% versus
Stephen Innes, managing partner at SPI Asset Management,
said markets were super-sensitive around liquidity in government
bond markets following Britain’s experience in
“Any liquidity deterioration in CGBs (Chinese government
bonds) should manifest in CNH (offshore yuan) weakness and a
negative impact on A-shares,” Innes said.
Some currency traders said the yuan strength on Friday also
came as companies have started to convert foreign exchange
receipts into the local currency for various needs and
administrative requirements towards the year-end.
However, gains in the yuan were limited by worries over
recent rises in domestic COVID outbreaks across the country.
The southern Chinese city of Guangzhou is setting up
makeshift hospitals and quarantine sites with capacity for
nearly 250,000 beds for COVID infections, officials said on
Thursday, as cases across the country hit their highest level
“The risk of further COVID restrictions and associated
disruptions are growing as we approach winter,” said Alvin Tan,
head of Asia FX at RBC Capital Markets.
“Hence, the near-term risk is actually of more social
restrictions, with associated negative effects on economic
By midday, the global dollar index fell to 106.374
from the previous close of 106.694, while the offshore yuan
was trading at 7.131 per dollar.
The yuan market at 0400 GMT:
Item Current Previous Change
PBOC midpoint 7.1091 7.0655 -0.61%
Spot yuan 7.1255 7.1551 0.42%
Divergence from 0.23%
Spot change YTD -10.81%
Spot change since 2005 16.15%
Item Current Previous Change
Dollar index 106.374 106.694 -0.3
*Divergence of the dollar/yuan exchange rate. Negative number
indicates that spot yuan is trading stronger than the midpoint.
The 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
Offshore spot yuan 7.131 -0.08%
Offshore 6.9535 2.24%
*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 Kenneth