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Yuan retreats as China's stocks tire of rallying, U.S. pressure builds

Credit: REUTERS/FLORENCE LO

The yuan edged down on Friday as the Chinese stock market gave up more gains from a week-long rally on worries that Beijing may start to scale back policy support and as Washington ramped up political pressure amid worsening U.S-Sino relations.

HONG KONG, July 17 (Reuters) - The yuan edged down on Friday as the Chinese stock market gave up more gains from a week-long rally on worries that Beijing may start to scale back policy support and as Washington ramped up political pressure amid worsening U.S-Sino relations.

The onshore yuan CNY=CFXS weakened 0.16% to 7 per U.S. dollar by 0411 GMT, while the offshore yuan CNH=D3 was just 0.02% softer at 6.9985 per dollar. The global dollar index =USD was pretty much flat at 96.269.

The Chinese stock market extended its fall on Friday. It snapped a long streak of gains on Thursday as investors paused their buying spree on signs of policy tightening after better-than-expected economic numbers.

"Going forward, there may not be as much hot money coming in, when other markets and global economy are also recovering," said Bruce Yam, forex strategist at brokerage Everbright Sun Hung Kai in Hong Kong.

Tense U.S.-China relations also weighed on the yuan.

The Trump administration may ban all members of China's ruling Communist Party and their families from traveling to the United States, while the U.S. Attorney General called companies such as Disney DIS.N "pawns of Chinese influence".

"Although China became first major economy to expand since the coronavirus, investors could not shake off the rapid deterioration in US-China relations," analysts at DBS wrote in a note on Friday.

The onshore yuan is set to end the week flat, while the offshore yuan is just 0.2% firmer than in the previous week.

The People's Bank of China set the midpoint rate CNY=PBOC at 7.0043 per dollar prior to Friday's market open, slightly softer than the Reuters estimate of 6.9957.

The yuan market at 0411 GMT:

ONSHORE SPOT:

Item

Current

Previous

Change

PBOC midpoint CNY=SAEC

7.0043

6.9913

-0.19%

Spot yuan CNY=CFXS

7

6.9891

-0.16%

Divergence from midpoint*

-0.06%

Spot change YTD

-0.53%

Spot change since 2005 revaluation

18.24%

Key indexes:

Item

Current

Previous

Change

Thomson Reuters/HKEX CNH index

92.67

92.59

0.1

Dollar index

96.269

96.277

0.0

*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= *

6.9985

0.02%

Offshore non-deliverable forwards CNY1YNDFOR= **

7.1269

-1.72%

*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)

((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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