China’s yuan inches up; Fed in focus


14/06/2017 08:10 AST

China’s yuan firmed slightly against the US dollar yesterday, ahead of possibly tighter monetary policy at home if US interest rates rise this week.

The market has turned its focus to the Federal Reserve’s two-day policy meeting, speculating that a hike in rates there will have a spillover effect on domestic money rates.”The market believes that China is highly likely to follow the Fed increasing the market rates this time, like what happened in March,” said a foreign exchange trader at a Chinese bank in Shanghai. He said that if the Fed stands pat on rates, however, there might not be immediate impact on the yuan from a softer dollar, as the market had already priced in a June rate hike in the United States to support the greenback.

The People’s Bank of China set the midpoint rate at 6.7954 per dollar prior to market open, weaker than the previous fix 6.7948. In the spot market, the yuan opened at 6.7984 per dollar and was changing hands at 6.7970 at midday, 18 pips firmer than the previous late session close but 0.02% softer than the midpoint. Traders said spot yuan traded in tight ranges in the morning, but trading volumes climbed suggesting that some institutions were taking advantage of tiny price swings to make intraday trades for quick profit.

The daily trading volume totalled $18.122bn, compared with full-day volume of $24.147bn on Monday.

Market participants expect such sideways trade to persist until the Fed announces its interest rate decision today, or during early Asian trade on Thursday.

With the Fed widely anticipated to raise interest rates, investors will be looking for fresh clues on the pace of further tightening in the months to come and next year, and any details on its plans to trim its balance sheet.

A Reuters poll found that a small majority of traders in China’s financial markets think the PBoC will likely raise short-term interest rates this week if the Fed hikes its key policy rate. HSBC said in a report the recent policy-induced decline in USD-RMB suggest the Chinese authorities have a strong desire to quash one-way RMB depreciation expectations.

It lowered its USD-RMB forecast to 6.90 for year-end 2017 from 7.10 previously. Economic Daily, a newspaper managed by the state cabinet, said on Tuesday the introduction of a “counter-cyclical factor” into calculating the yuan’s official midpoint was to improve the market-based yuan exchange rate formation mechanism, rather than intervention. The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 94.39, firmer than the previous day’s 94.35. The global dollar index rose to 97.247 from the previous close of 97.138.

The offshore yuan was trading 0.11% firmer than the onshore spot at 6.7893 per dollar. Offshore one-year non-deliverable forwards contracts (NDFs), considered the best available proxy for forward-looking market expectations of the yuan’s value, traded at 6.9715, 2.53% weaker than the midpoint.

Gulf Times
Forex News
2017 | 2016 | 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | News Archive
Most Viewed Companies
Ticker Price Volume
GFH 0.46 3,578,848
QNBK 135.9 109,396
SABIC 98.06 2,513,945
DSI 0.39 45,711,538
AMLAK 1.09 12,534,009
AIRARABIA 1.12 4,055,524
EEC 18.03 354,774
Recent News

Drake & Scull to proceed with Fairmont Abu Dhabi MEP works
Drake & Scull International (DSI), a regional market leader in engineering and related services, has announced that it will proceed with the mechanical, electrical and plumbing (MEP) works for the Fa

$32bn worth urban projects 'at tendering stage in GCC'
As many as 801 construction projects with a combined estimated value of Dh117.44 billion ($32 billion) are currently in the tendering stage in the GCC's urban construction sector, according to a repo

Engie completes $762m investment in Tabreed
The National Central Cooling Company (Tabreed) has announced the successful completion of an investment of approximately Dh2.8 billion ($762.32 million) by Engie, a global energy company, to acquire

UAE Central Bank deposits top $33 billion in H1
The total value of monetary deposits at the UAE Central Bank amounted to Dh123 billion ($33.5 billion) during the first half (H1) of the year, Dh122.95 billion of which are in banknotes and Dh50 mill

Qatar sovereign wealth fund trims Credit Suisse stake
The Qatar Investment Authority has reduced its shareholding in Credit Suisse Group to 4.94 percent, amid the Middle Eastern nation’s diplomatic crisis with neighbouring countries.

The coun

GulfBase GCC Index
Search By
  • Company Symbol
  • Company Name
  • Mutual Fund Name
  • News Content
Send this page to a friend

Poll

Looking ahead, what change you are more likely to make in investing in your domestic stock market?