Latest news with #CFETS
New Straits Times
4 days ago
- Business
- New Straits Times
China yuan's trade-weighted value falls to near two-year low
SHANGHAI: The Chinese yuan's value against its major trading partners fell close to a two-year low on Friday, reflecting the central bank's efforts to keep it steady versus the US dollar even as other currencies rise sharply. WHY IT'S IMPORTANT The People's Bank of China (PBOC) has been carefully managing its currency, allowing only marginal appreciation against the dollar even as other major and Asian currencies rally against a weakening US currency. The policy, done through keeping the daily official yuan midpoint guidance steady, is expected to protect exporters during an ongoing trade war by offsetting tariffs with better currency conversion rates for their revenues. A steadier yuan will also ensure there is no chaotic rush by corporates and households to sell their nearly US$1 trillion in foreign exchange deposits. While Beijing has said it does not deliberately seek a weaker currency, the currency's passive decline comes at a time of heightened Sino-US tensions for an economy struggling with deflationary pressures and weak domestic demand. BY THE NUMBERS The CFETS yuan index, a gauge that measures the yuan's weighted value versus 25 currencies of trading partners, fell to 95.58 and is down 5.8 per cent year-to-date, according to Reuters calculations based on official data. The yuan has, however, strengthened 1.6 per cent versus the dollar during the same period. The official yuan midpoint has barely changed and is up about 0.05 per cent this year. KEY QUOTES Goldman Sachs estimated that a 10 per cent yuan depreciation in trade-weighted terms could increase goods exports by 5 per cent with a one-quarter lag, equivalent to a an increase of 75-basis-point GDP growth impulse. "A greater than 5 per cent decline in CFETS within five months may be too fast and a further dip below 95 could fuel concerns or even some hostility from other Asian trading partners," Barclays analysts said in a note.
Business Recorder
03-06-2025
- Business
- Business Recorder
China's yuan slips as caution prevails ahead of Trump-Xi talks
SHANGHAI: China's yuan weakened against the dollar on Tuesday, the first trading session after the holiday, as investors cautiously awaited fresh developments in the Sino-U.S. relations following some signs of a re-escalation of tensions. U.S. President Donald Trump and Chinese leader Xi Jinping will likely speak this week, the White House said on Monday, and market participants will be closely monitoring the outcome after Trump accused China of violating an agreement to roll back tariffs and trade restrictions. 'The yuan is likely to swing in a thin range before the talk as heightened trade tensions should hurt both of the world's two largest economies,' said a trader at a Chinese bank. As of 0351 GMT, the onshore yuan was 0.02% lower at 7.1974 per dollar, while its offshore counterpart traded at 7.1994. Prior to the market open, the People's Bank of China (PBOC) set the midpoint rate at 7.1869 per dollar, and 3 pips firmer than a Reuters' estimate of 7.1872. The spot yuan is allowed to trade 2% either side of the fixed midpoint each day. China's yuan looks set for monthly rise Recent broad dollar weakness has allowed the central bank to gradually close the gap between its official guidance and market projections. The PBOC had set persistently firmer-than-expected midpoint settings since November to keep the yuan stable and prevent excess weakness. However, FX analysts at Barclays said the PBOC was in 'a difficult situation now.' 'On the one hand, daily USD/CNY fixings suggest no intention to drive the exchange rate significantly below 7.20, likely on the back of concerns of potential large repatriation flows from exporters,' they said in a note. 'On the other hand, a greater than 5% decline in CFETS within five months may be too fast and a further dip below 95 could fuel concerns or even some hostility from other Asian trading partners.' Based on Tuesday's midpoint fixing, the yuan's value against its major trading partners, as measured by CFETS index, eased to 95.79, and down 5.6% year-to-date, according to Reuters calculations based on official data. The onshore yuan has gained about 1.4% to the dollar during the same period. Traders and analysts noted seasonal foreign exchange demand would kick in to pressure the yuan soon. Overseas-listed Chinese companies usually have higher foreign exchange needs to make dividend payments to their shareholders between May and August. Separately, markets were little swayed by manufacturing activity data, which contracted last month, based on both official and private surveys. On the macro front, investors will switch their attention to trade data due on June 9, seeking more clues from export figures and getting a clearer picture of the health of the economy. The Hong Kong dollar eased to 7.8450 per U.S. dollar on Tuesday, a level not seen since September 2023 and not too far from testing the weaker end of its trading band. The Hong Kong dollar's weakness reflected loose cash conditions, with overnight HKD Hong Kong Interbank Offered Rate (HIBOR), a key barometer of liquidity conditions, hitting record lows. It was last fixed at 0.02027% on Tuesday.
Business Recorder
28-04-2025
- Business
- Business Recorder
Yuan slips as investors await Sino-US trade developments, China PMI
SHANGHAI: China's yuan slipped against the dollar on Monday, as investors carefully monitored the greenback's movements in global markets and developments in trade tensions between the world's two largest economies. Currency traders said they will also pay attention to China's April manufacturing data due on Wednesday for signs of any impact on the economy from US President Donald Trump's 145% tariffs on Chinese goods. While Trump has claimed progress is being made on trade with China, and many other countries, actual evidence is lacking. Treasury Secretary Scott Bessent failed on Sunday to back Trump's assertion that tariff talks with China were under way. 'We think China will leave the door open for negotiations, but won't be in a rush to reach a deal with the US,' economists at Barclays said in a note. As of 0326 GMT, the onshore yuan was 0.13% lower at 7.2960 per dollar, while its offshore counterpart was down about 0.09% in Asian trade at 7.2948. 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 7.2043 per dollar, its strongest since April 8 and 785 pips firmer than a Reuters' estimate of 7.2828. This month, the PBOC slightly eased its control on the currency, allowing official guidance to weaken past the key threshold of 7.2. However, the guidance came in stronger than market forecasts, which traders interpreted as an official attempt to keep the yuan steady while allowing some flexibility to counteract tariff shocks. Underlining the external risks, however, the yuan's value against its major trading partners, as measured by the CFETS yuan basket index, fell about 5% so far this year to 96.42, according to Reuters calculations based on official data. China's yuan slips Meanwhile, the yuan traded largely flat against the dollar year-to-date. 'We maintain our year-end USD/CNY forecast of 7.35, which … implies a yuan depreciation against the CFETS basket and should be supportive of China's exports and growth on the margin,' said Lisheng Wang, China economist at Goldman Sachs. China's deputy central bank governor, Zou Lan, re-affirmed on Monday the continuation of a moderately loose monetary policy and increased support for the economy, while maintaining yuan stability. In global markets, the dollar made a steady start on Monday as investors prepared for a week packed with economic data that may give a first glimpse of whether Trump's trade war is hitting home.
Business Recorder
28-04-2025
- Business
- Business Recorder
China's yuan slips
SHANGHAI: China's yuan slipped against the dollar on Friday, as investors headed into the weekend fretting about US President Donald Trump's capricious tariff policy that has dramatically raised the level of uncertainty in financial markets. Global currency markets had a wild week reacting to fast-changing developments in trade tensions between Washington and Beijing and Trump's threats to fire Federal Reserve Chair Jerome Powell. In his latest remarks, Trump asserted that trade talks between the US and China were underway, pushing back against Chinese claims that no discussions have taken place. 'Trump is so unpredictable, and it's hard to guess what will happen next,' said a trader at a foreign bank. By 0312 GMT, the onshore yuan was 0.09% lower at 7.2963 per dollar, and almost flat for the week so far, while its offshore counterpart traded down about 0.11% in Asian trade to 7.2966. 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 7.2066 per dollar, and 832 pips firmer than a Reuters' estimate of 7.2898. This month, the PBOC slightly eased its control on the currency, allowing official guidance to weaken past the key threshold of 7.2. However the guidance came in stronger than market forecasts, which traders interpreted as an official attempt to keep the yuan steady while allowing some flexibility to counteract tariff shocks. Underlining the external risks, however, the yuan's value against the its major trading partners, as measured by the CFETS yuan basket index, hovered near a 21-month low of 96.29, according to Reuters calculations based on official data. The CFETS index has lost about 5.1% year-to-date, while the yuan was largely flat against the dollar during the same period. 'While market attention may have shifted slightly to the yuan's recent weakness against the CFETS basket, we believe this is much less of a concern for Beijing,' said Ting Lu, chief China economist at Nomura.
Business Recorder
21-04-2025
- Business
- Business Recorder
China's yuan hovers near 2-week high, tariffs in focus
SHANGHAI: China's yuan hovered near a more than two-week high against the dollar on Monday, although uncertainty surrounding Sino-US trade tensions restricted the currency's upside potential. Traders said the yuan's movements were following the dollar's weak performance, as the US currency tumbled after investor confidence in the US economy was shaken by President Donald Trump's plans to overhaul the Federal Reserve. By 0342 GMT, the onshore yuan was 0.17% firmer at 7.2868 per dollar, not far from a two-week high of 7.2855 reached on Friday. Its offshore counterpart climbed to a one-week high of 7.2879 per dollar in morning deals before trading at 7.2890 around midday. However, market participants remained cautious due to ongoing trade tensions between Washington and Beijing, and refrained from pushing the yuan to new highs. China on Monday warned countries against striking a broader economic deal with the United States at its expense, escalating its rhetoric in the intensifying trade war between the world's two biggest economies. 'If there is positive progress between China and the United States on tariff issues, the yuan exchange rate will gain some support,' said analysts at China International Capital Corporation (CICC). 'Otherwise, the yuan may still face certain depreciation pressure due to cross-border capital outflows,' they said, expecting the yuan to fluctuate between 7.28 and 7.33 per dollar this week. Prior to 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 7.2055 per dollar, 833 pips firmer than a Reuters' estimate of 7.2888. This month, the PBOC slightly eased its control on the currency, allowing official guidance to weaken past the key threshold of 7.2. However, it came in stronger than market forecasts, which traders interpreted as an official attempt to keep the yuan steady while allowing some flexibility to counteract tariff shocks. China's yuan rises to 2-week high on hopes of de-escalation in US-China tensions Nonetheless, the yuan's value against the its major trading partners, as measured by the CFETS yuan basket index, fell to a new 21-month low of 95.97, according to Reuters calculations based on official data. The CFETS index has lost about 5.42% year-to-date, while the yuan was up about 0.18% against the dollar during the same period. Separately, China kept benchmark lending rates steady on Monday for the sixth successive month, aligning with market expectations. But analysts and traders anticipate that monetary easing measures could be rolled out soon to support the economy.
