Latest news with #PBOC
Mint
2 days ago
- Business
- Mint
China Seeks to Slow Yuan's Gains After Months of Propping It Up
The dollar's extended slide has prompted China's central bank to change tack in managing its currency, as it pivots from supporting the yuan to guarding against the risk of a rapid appreciation. The People's Bank of China fixed the yuan's daily reference rate at a slightly weaker level than market forecasts on Monday and Tuesday, after setting it stronger for most of the past six months. The PBOC is also on track to pause bill sales in Hong Kong for a third month, the longest run since 2018, leaving liquidity ample and easing upward pressure on the yuan. Adding to that, state-owned banks have been spotted buying dollars in the onshore market in recent weeks as they try to slow the Chinese currency's gains, according to traders. The PBOC's recent shift is the latest example of how the dollar's descent is rippling through global financial markets, as policymakers step back from propping up their currencies and anticipate more room to ease to shore up growth. In China's case, the authorities have to walk a fine line as a sharply weaker yuan may spur outflows, while a rapidly strengthening one could hurt exports. 'China's domestic condition is not ready to take on significant yuan appreciation,' said Ju Wang, head of Greater China FX & rates strategy at BNP Paribas SA. 'We still believe the yuan will lag the basket despite the weak USD trend and de-dollarization theme.' Beijing's tariff truce with Washington has bolstered China's currency, helping it advance more than 2% versus the greenback from an 18-year low set in April. The rally has given the PBOC room to pare back its defense of the yuan. The offshore yuan slipped 0.1% to 7.1980 per dollar on Wednesday to head for a third day of declines. This came after the PBOC set the yuan fixing at 7.1894, a slightly weaker rate for a second session. The PBOC has refrained from issuing bills in Hong Kong, and Bloomberg's calculation show that maturities in the three months through May unleashed 85 billion yuan of funds into the market. That helped to keep one-month funding costs on the yuan at around 1.7%, compared with as much as 4.5% in January when the PBOC offered extra bills to squeeze yuan short sellers. The latest economic data reinforce the need for authorities to ensure that the yuan doesn't strengthen too quickly. China's exports have held up well, but persistent price deflation and weak consumption highlight the need for continued policy support. Analysts say Chinese officials are unlikely to sit on the sidelines if the yuan starts to make rapid gains, akin to the recent moves seen in the Taiwan dollar and South Korean won. 'Alongside the resurfacing USD selloff, the PBOC is likely to tread cautiously to avoid excessive yuan appreciation, which could weigh on China exports amid the tariffs rout,' said Ken Cheung, chief Asian FX strategist at Mizuho Bank. This article was generated from an automated news agency feed without modifications to text.
Bloomberg
2 days ago
- Business
- Bloomberg
China Seeks to Slow Yuan's Gains After Months of Propping It Up
The dollar's extended slide has prompted China's central bank to change tack in managing its currency, as it pivots from supporting the yuan to guarding against the risk of a rapid appreciation. The People's Bank of China has set the yuan's daily fixing at a slightly weaker level than market forecasts this week, after setting it stronger for most of the past six months. The PBOC is also on track to pause bill sales in Hong Kong for a third month, the longest run since 2018, leaving liquidity ample and easing upward pressure on the yuan.
The Star
3 days ago
- Business
- The Star
China's yuan slips as PBOC appears to reinforce currency stability via guidance fix
SHANGHAI: China's yuan slipped against the dollar on Tuesday, as the central bank set a slightly weaker-than-expected midpoint fixing for the second day in a row, a signal that investors interpreted as an official intention to reinforce currency stability. Most emerging market currencies strengthened to reflect the broad dollar weakness, as investors anxiously awaited fresh developments in U.S. President Donald Trump's trade policy and ongoing concerns over the U.S. fiscal outlook. However, the yuan underperformed its peers as the central bank pivoted from preventing excess losses in the Chinese currency over the past six months to slowing yuan rallies, currency traders and analysts said. "We believe policymakers are likely to still adopt a measured approach to appreciation like how they took on a measured approach when USD/RMB was trading higher previously," said Christopher Wong, FX strategist at OCBC Bank. The yuan has strengthened about 1.1% to the dollar so far this month, below gains seen in other Asian currencies, such as the Korean won or Taiwan dollar. 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 7.1876 per dollar, and 34 pips weaker than a Reuters' estimate of 7.1842. "In the near term, the PBOC may turn more cautious against yuan appreciation bias if the dollar sell-off persists," said Ken Cheung, chief Asian FX strategist at Mizuho Bank. "In this sense, the PBOC may use the yuan fixing to smooth out yuan appreciation bias amid the dollar decline, driving the yuan basket index lower to support export sector." The CFETS yuan basket index, a gauge that measures the yuan's strength against its major trading partners, eased to 95.8 on Tuesday and has lost about 5.6% so far this year. The spot yuan, however, has gained 1.6% versus the dollar. As opposed to a persistently strengthening bias in the official guidance fix since November, the weaker-than-expected fixing discouraged market participants from testing new highs in the yuan, said a trader at a Chinese bank. As of 0349 GMT, the onshore yuan was 0.05% lower at 7.1903 per dollar, while its offshore counterpart was down about 0.09% in Asian trade to 7.1840. Seasonal demand also weighed on the yuan, as many overseas-listed Chinese companies usually have higher foreign exchange needs to make dividend payments to their overseas shareholders between May and August. Separately, the market largely shrugged off April industrial profit data, which picked up pace, giving policymakers cause for optimism that recent stimulus efforts are helping to keep the economy afloat despite trade tensions with the United States. Investors will look to May manufacturing activity data due on Saturday for more clues on the health of the economy. - Reuters
Business Recorder
3 days ago
- Business
- Business Recorder
China's yuan slips as PBOC appears to reinforce currency stability via guidance fix
SHANGHAI: China's yuan slipped against the dollar on Tuesday, as the central bank set a slightly weaker-than-expected midpoint fixing for the second day in a row, a signal that investors interpreted as an official intention to reinforce currency stability. Most emerging market currencies strengthened to reflect the broad dollar weakness, as investors anxiously awaited fresh developments in US President Donald Trump's trade policy and ongoing concerns over the US fiscal outlook. However, the yuan underperformed its peers as the central bank pivoted from preventing excess losses in the Chinese currency over the past six months to slowing yuan rallies, currency traders and analysts said. 'We believe policymakers are likely to still adopt a measured approach to appreciation like how they took on a measured approach when USD/RMB was trading higher previously,' said Christopher Wong, FX strategist at OCBC Bank. The yuan has strengthened about 1.1% to the dollar so far this month, below gains seen in other Asian currencies, such as the Korean won or Taiwan dollar. 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 7.1876 per dollar, and 34 pips weaker than a Reuters' estimate of 7.1842. 'In the near term, the PBOC may turn more cautious against yuan appreciation bias if the dollar sell-off persists,' said Ken Cheung, chief Asian FX strategist at Mizuho Bank. Yuan falls to 2007 lows as US tariffs on China kick in 'In this sense, the PBOC may use the yuan fixing to smooth out yuan appreciation bias amid the dollar decline, driving the yuan basket index lower to support export sector.' The CFETS yuan basket index, a gauge that measures the yuan's strength against its major trading partners, eased to 95.8 on Tuesday and has lost about 5.6% so far this year. The spot yuan, however, has gained 1.6% versus the dollar. As opposed to a persistently strengthening bias in the official guidance fix since November, the weaker-than-expected fixing discouraged market participants from testing new highs in the yuan, said a trader at a Chinese bank. As of 0349 GMT, the onshore yuan was 0.05% lower at 7.1903 per dollar, while its offshore counterpart was down about 0.09% in Asian trade to 7.1840. Seasonal demand also weighed on the yuan, as many overseas-listed Chinese companies usually have higher foreign exchange needs to make dividend payments to their overseas shareholders between May and August. Separately, the market largely shrugged off April industrial profit data, which picked up pace, giving policymakers cause for optimism that recent stimulus efforts are helping to keep the economy afloat despite trade tensions with the United States. Investors will look to May manufacturing activity data due on Saturday for more clues on the health of the economy.
Business Times
4 days ago
- Business
- Business Times
Goldman Sachs expects stronger yuan to boost Chinese stocks
CHINESE stocks are expected to benefit from further gains in the yuan, which has been showing resilience amid the country's trade spat with the US, according to strategists at Goldman Sachs. Every 1 per cent appreciation of the yuan versus the US dollar can boost Chinese equities by 3 per cent thanks to factors including improved corporate earnings outlook and stronger foreign inflows, strategists including Kinger Lau wrote in a note on Monday (May 26). Earlier this month, the bank raised its 12-month forecast for the yuan to 7 per US dollar, from 7.35. 'Chinese stocks tend to perform well when the currency rises,' Lau and his colleagues wrote. The outlook for the currency lends support to their 'overweight stance' on Chinese stocks, they said, adding that consumer discretionary, property and broker stocks typically outperform under a strong currency. The MSCI China Index has recouped its losses since US President Donald Trump's Apr 2 tariff offensive, with a three-month trade truce with the US helping the market's rebound. Chinese assets overall have benefited from a diversification away from US markets as concerns about Trump's tariffs and tax cuts sustain the 'sell America' narrative. While investors continue to doubt the allure of US stocks and the US dollar, the People's Bank of China (PBOC) has sought to keep the yuan stable and add support to the economy via interest-rate cuts. The onshore yuan has gained around 1.4 per cent versus the greenback in May, and reached 7.1674 on Monday, its strongest level since November. On Monday, the PBOC strengthened the yuan's reference rate by the most since January amid the greenback's extended slide. That said, the official fixing of 7.1833 per US dollar was still weaker than the yuan's spot price, which suggests China is managing volatility and seeking to avoid a sharp appreciation such as that seen in the Taiwanese dollar. BLOOMBERG
