China's yuan firmed on Monday, reflecting the US dollar's broad declines as President Donald Trump's inability to pass a healthcare reform bill raised doubts about his ability to see through planned fiscal stimulus measures. The People's Bank of China set the midpoint rate at 6.8701 per dollar prior to market open, firmer than the previous fix 6.8845.
The spot market opened at 6.8773 per dollar and was changing hands at 6.8735 at midday, strengthening over 100 pips from the previous late session close and 0.05 percent weaker than the midpoint.
The spot rate is currently allowed to trade with a range 2 percent above or below the official fixing on any given day.
The offshore yuan was trading 0.24 percent stronger than the onshore spot at 6.8568 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 7.0655, 2.77 percent weaker than the midpoint.
One-year NDFs are settled against the midpoint, not the spot rate.
"As the global dollar index dropped sharply overnight, there was strong demand to sell dollars early this morning, but the market has stablised now," said a trader at a Chinese bank in Shanghai.
The dollar index against a basket of major currencies hit its lowest since Feb. 2 and was at 99.285 near midday.
The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 94.14, weaker than the previous day's 94.22.
Sentiment towards most emerging Asian currencies improved in the past two weeks, after the US Federal Reserve gave less "hawkisk" interest rate guidance than some analysts had expected.
Bets on the yuan turned slightly bullish. Although long positions were estimated to be small, it was still the most upbeat that investors have been on the yuan since April last year.