China’s yuan firms on signs of property sector stabilising

SHANGHAI: China’s yuan strengthened on Thursday, as signs the country’s property market is stabilising raised expectations of a broader economic recovery after Beijing dropped its stringent zero-COVID strategy.

Meanwhile, investors were cautiously watching offshore banking crises that have led to debates over whether the US Federal Reserve may be forced to hit pause or even reverse course on interest rate hikes next week.

The People’s Bank of China set the midpoint rate at 6.9149 yuan per US dollar prior to market open, weaker than the previous fix of 6.868.

In the spot market, the yuan opened at 6.8931 per dollar and was changing hands at 6.9028 at midday, 39 pips firmer from the previous late session close.

China’s February new home prices rose at the fastest pace since July 2021, official data showed on Thursday, following previous indicators showing much narrower declines in home sales, developer investment and construction starts, suggesting the real estate sector was stabilising.

“The stabilising China property market should help anchor expectations for China reopening trade and support the RMB (yuan) as well,” said Ken Cheung, Chief Asian FX Strategist at Mizuho Bank.

Goldman Sachs has raised its forecast for China’s gross domestic product (GDP) growth this year to 6% from 5.5% on the back of the country’s rapid reopening and improved activity in the real estate sector, the investment bank said in a note on Wednesday.

China’s yuan eases as uneven economic recovery dents sentiment

Safe-haven currencies like the US dollar and the yen were in demand on renewed fears of a global banking crisis, after contagion from the collapse of US-based Silicon Valley Bank spread across the Atlantic to Swiss bank Credit Suisse.

Investors were also cautiously waiting for the Fed’s decision on interest rates next week.

“Let’s see how things will unfold at Credit Suisse. I expect it will be difficult for the Federal Reserve to continue large-scale rate hikes, and I am still bullish on the yuan,” said a trader at a Chinese bank.

Goldman Sachs lowered its terminal rate forecast to 5.25% to 5.5% after removing a rate hike in March on the back of recent stresses in the US banking system.

The global dollar index fell to 104.498 from the previous close of 104.646. The offshore yuan was trading at 6.9009 per dollar.