SHANGHAI: China’s yuan inched higher against the dollar on Wednesday as investors anxiously awaited a key policy meeting in Beijing that is expected to set the tone for the economic agenda for next year.
Beijing is expected to hold the Central Economic Work Conference (CEWC) this week, which usually maps out the growth, budget deficit and other targets for next year.
The targets are typically not announced at the end of the annual meeting, with hard numbers not revealed until China’s parliament meets in spring.
But investors are still hoping for some clues after Chinese leaders signalled on Monday they are ready to deploy whatever stimulus is needed to counter the impact of expected U.S. trade tariffs on next year’s economic growth.
Analysts at Standard Chartered said they expect the meeting to set a pro-growth tone and lay out a stimulus plan by “providing more details on what the Politburo called ‘extraordinary counter-cyclical adjustment.’”
“Monetary easing could provide positive surprises, but we do not think it will be comparable to the 2009 stimulus given diminishing policy room and concerns about financial stability,” they said in a note.
Yuan firms as major China policy shift boosts sentiment
China will adopt an “appropriately loose” monetary policy next year, the first easing of its stance in some 14 years, alongside a more proactive fiscal policy to spur economic growth, the Politburo said on Monday.
As of 0354 GMT, the onshore yuan was 0.02% higher at 7.2479 to the dollar. Its offshore counterpart traded at 7.2518.
Prior to the market opening, the People’s Bank of China (PBOC) set the midpoint rate, around which the yuan is allowed to trade in a 2% band, at 7.1843 per dollar, and 536 pips firmer than a Reuters’ estimate of 7.2379.
The PBOC has been setting its official midpoint fixings on the firmer side of the key 7.2 per dollar level and stronger than market projections since mid-November, which traders and analysts widely interpret as a sign of rising unease over recent yuan declines.
Nevertheless, the Chinese currency has depreciated for 10 straight weeks, weighed down by U.S. President-elect Donald Trump’s tariff threats and monetary policy divergence between China and the United States.
The onshore yuan has fallen about 2% to the dollar since Trump’s election victory on Nov. 5.
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