China's yuan on Thursday eased against the stronger dollar, which was supported by a record surge for Wall Street stocks and higher US Treasury yields. But losses for the yuan were capped as volumes were thin on the second last session in 2018, with many traders on year-end holidays.
Prior to market opening, the People's Bank of China (PBOC) set the midpoint rate at 6.8894 per dollar, 49 pips weaker than the previous fix of 6.8845. In the spot market, the onshore yuan opened at 6.8888 per dollar and was changing hands at 6.8930 at midday, 82 pips weaker than the previous late session close and 0.05 percent softer than the midpoint.
News that China's industrial profits fell for the first time in nearly three years had little impact on the intraday spot yuan trade. On Thursday, the onshore spot yuan rate was in a range of about 80 pips, and volume was $10.736 billion at midday. Half-day volume usually hits $15 billion on normal days.
Bill Zhou, analyst at China Construction Bank (Asia) in Hong Kong, said he expects both onshore and offshore yuan to continue trading in tight range on Thursday. This year, the yuan has weakened 5.6 percent against the dollar, hurt by China's economic slowdown and the Sino-US trade row. In 2017, the currency gained about 6.8 percent against the greenback.
Market watchers believe developments in Sino-US trade negotiations will continue to set the tone for the Chinese unit in 2019, along with performance of the dollar globally. The offshore yuan was trading at 6.8975 per dollar as of midday.
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