SHANGHAI/SINGAPORE: China’s yuan eased against a rising dollar on Thursday, while investors were anxiously awaiting US non-farm payrolls for more clues on the US monetary tightening trajectory.
Currency traders said the yuan has been swinging in a thin range between 6.85 to 6.9 per dollar since mid-March as market participants were cautiously looking for the next catalyst.
And the US jobs data due on Friday could affect the Federal Reserve policy outlook and bring volatility to the dollar and other major currencies, they added.
Prior to market opening, the People’s Bank of China (PBOC) set the midpoint rate at 6.8747 per dollar, 48 pips weaker than the previous fix of 6.8699.
In the spot market, the onshore yuan opened at 6.8810 per dollar and was changing hands at 6.8799 at midday, 29 pips softer than the previous late session close on Tuesday.
Chinese financial markets were closed for the Ching Ming Festival, known as the tomb-sweeping festival, on Wednesday.
Currency traders said trading was slow on Thursday morning, with trading volume standing at $10.8 billion as of midday, down from a normal half-day volume of about $15 billion.
Tepid trading also came as some global markets will be closed for the Good Friday holiday.
China’s yuan eases on corporate dollar demand, markets wary of Sino-US tension
Some domestic market participants covered their short positions in the greenback ahead of the US non-farm payrolls. Markets will closely monitor the US data and if the non-farm payrolls are weak, the Fed will turn more dovish, said a trader at a foreign bank.
“However, that relationship seems to have shifted a tad as concerns of a sharper economic downcycle could also strengthen demand for safe haven USD,” Maybank analysts said in a note. Separately, market analysts expect some downside room in the yuan this year.
“Due to the recent incidents of SVB and other financial institutions, we expect a potential tighter liquidity condition in developed markets (DMs) compared with before, which could add an extra layer of constraint on economic development, and a subsequently more pessimistic exports outlook for China,” analysts at MUFG Bank said in a note.
They revised down their yuan forecasts to 6.65 per dollar at end-Q3 from 6.6 previously, and expect the yuan to finish the year at 6.55, down from 6.5 in an earlier prediction.
Meanwhile, Standard Chartered said they have maintained their yuan forecasts for the remainder of this year, although the projections are weaker than the current level.
“We maintain our USD/CNY forecasts of 6.80 for end-H1 and 6.75 for end-2023, and our 10-year China government bond (CGB) yield forecast of 3.0% for end-H1,” Standard Chartered said in a note.
By midday, the global dollar index rose to 102.032 from the previous close of 101.852, while the offshore yuan was trading at 6.8811 per dollar.
The one-year forward value for the offshore yuan traded at 6.7321 per dollar, indicating a 2.21% appreciation within 12 months.
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