Yuan firms as Beijing sets date for parliamentary meeting, dollar retreats

Credit: REUTERS/Kim Kyung Hoon

The yuan climbed on Wednesday, buoyed by hopes the coronavirus outbreak is under control in China after Beijing set a date for its parliamentary meeting and as the dollar softened.

HONG KONG, April 29 (Reuters) - The yuan climbed on Wednesday, buoyed by hopes the coronavirus outbreak is under control in China after Beijing set a date for its parliamentary meeting and as the dollar softened.

The Chinese currency also garnered momentum from a weaker dollar as investors moved back into riskier assets on more economies re-opening, and as they awaited policy signals from the Federal Reserve's meeting which wraps up later in the global day.

The onshore yuan CNY=CFXS was 0.06% stronger at 7.0762 at midday and the offshore yuan CNH=D3 firmed 0.13% to 7.0810 per dollar.

Prior to the onshore market open, the People's Bank of China set the midpoint rate CNY=PBOC at 7.0704 per dollar, close to the Reuters estimate of 7.0777.

China announced that the National People's Congress (NPC) will open a key annual session on May 22, indicating that the government sees the country returning to normal after months of disruption caused by the COVID-19 outbreak.

"The annual NPC is the key political and economic meeting to set the growth and budget deficit targets," Ken Cheung, chief Asian strategist at Mizuho in Hong Kong, wrote in a note.

"As the date of NPC has been confirmed, increasing speculation about China stimulus will keep the RMB rather supportive, with upside towards the 7 handle," he said.

The delayed parliamentary meeting, which normally takes place in March, will offset some of the seasonal depreciation pressure on the yuan that usually occurs in May, said Zhaopeng Xing, markets economist at ANZ in Shanghai.

Before the announcement, the yuan was already on a stable footing against the greenback as the dollar scaled back gains ahead of the Fed meeting. FED/DIARYFRX/

Investors will be watching the Fed for clues on its future policy path after it rapidly slashed interest rates, bought bonds and backstopped credit markets to cushion the economic shock of COVID-19.

"Recently there's been more buying of foreign exchange, but the fall in the dollar index offsets some of that (pressure on the yuan)," said one Shanghai-based trader.

Another trader in the city said the yuan will unlikely break out of its current trend before the Fed meeting ends.

The global dollar index =USD fell 0.17% to 99.698, while the Thomson Reuters/HKEX Global CNH index .RXYH, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 93.36, weaker than the previous day's 93.46.

The yuan market at 4:04AM GMT:

ONSHORE SPOT:

Item

Current

Previous

Change

PBOC midpoint CNY=SAEC

7.0704

7.071

0.01%

Spot yuan CNY=CFXS

7.0762

7.0804

0.06%

Divergence from midpoint*

0.08%

Spot change YTD

-1.60%

Spot change since 2005 revaluation

16.96%

Key indexes:

Item

Current

Previous

Change

Thomson Reuters/HKEX CNH index

93.36

93.46

-0.1

Dollar index

99.698

99.866

-0.2

*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% from official midpoint rate it sets each morning.

OFFSHORE CNH MARKET

Instrument

Current

Difference from onshore

Offshore spot yuan CNH= *

7.081

-0.07%

Offshore non-deliverable forwards CNY1YNDFOR= **

7.1493

-1.10%

*Premium for offshore spot over onshore CNY=CFXS

**Figure reflects difference from PBOC's official midpoint, since non-deliverable forwards are settled against the midpoint. CNY=SAEC.

(Reporting by Noah Sin; Additional reporting by Jindong Zhang in Shanghai; Editing by Jacqueline Wong)

((Noah.Sin@thomsonreuters.com; +852 5202 7991; Reuters Messaging: noah.sin.thomsonreuters.com@reuters.net; Twitter: https://twitter.com/noah_sin))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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