Corporate dollar demand dampens yuan as market awaits China GDP
SHANGHAI, April 15 () - China's yuan eased against the U.S. dollar on Monday, as corporate demand added downward pressure on the Chinese currency ahead of economic growth data this week.
Prior to market opening, the People's Bank of China (PBOC) set the midpoint rate at 6.7112 per dollar, 108 pips or 0.16 percent firmer than the previous fix of 6.7220.
In the spot market, onshore yuan opened at 6.7060 per dollar and was changing hands at 6.7095 at midday, 47 pips weaker than the previous late session close.
"Although the Q1 GDP data is expected to slow to 6.3 percent from 6.4 percent, the economy is likely to stabilise in the remainder of the year. And it would not be a problem to reach the full-year official growth target at 6.0 to 6.5 percent," he said, adding that he expects the yuan to trade in a range of 6.6750 to 6.7350 per dollar this week.
"The market will certainly pay close attention to the GDP data. Friday's lending data led global markets higher...it feels like Chinese data is now a leading indicator," said a Shanghai-based trader at a foreign bank.
Chinese data showed exports rebounded in March to a five-month high while new bank loans jumped by far more than expected, raising optimism that the world's second-largest economy may be starting to turn around.
The strong lending figures pulled back some market expectations for a cut in banks' reserve requirement ratios, which some analysts had felt was needed to boost liquidity.
"Such a strong credit reading may lower the probability or magnitude of an RRR cut in the near future, in our view," Wang Tao, economist at UBS said in a note.
The market is monitoring what the PBOC will do when a medium-term lending facility with a value of 366.5 billion yuan expires on Wednesday.
A sustained recovery in China's economy would be a good sign for the global economy that has been buffetted by trade war tensions over the past year.
Traders said the market was still tracking the progress of Sino-U.S. trade negotiations, but expectations that China and the United States would ultimately reach a deal to end their trade dispute has been largely priced in.
Corporate clients had started to meet their dollar requirements on Monday morning, traders said, adding that some had held back from buying in the hope that a trade deal would boost the yuan and shave their dollar costs.
U.S. negotiators have tempered demands that China curb industrial subsidies as a condition for a trade deal after strong resistance from Beijing, according to two sources briefed on discussions, marking a retreat on a core U.S. objective for the trade talks.
The global dollar index fell to 96.846 at midday, from the previous close of 96.972.
The offshore yuan was trading at 6.711 per dollar as of midday.
The yuan market at 0411 GMT:
Divergence from midpoint*
Spot change YTD
Spot change since 2005 revaluation
Thomson Reuters/HKEX CNH index
*Divergence of the dollar/yuan exchange rate. Negative number indicates that spot yuan is trading stronger than the midpoint. The People's Bank of China (PBOC) allows the exchange rate to rise or fall 2 percent from official midpoint rate it sets each morning.
OFFSHORE CNH MARKET
Difference from onshore
Offshore spot yuan *
Offshore non-deliverable forwards **
*Premium for offshore spot over onshore
**Figure reflects difference from PBOC's official midpoint, since non-deliverable forwards are settled against the midpoint. .
($1 = 6.7084 Chinese yuan)
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