Yuan steady as central bank sets firmest fixing in a month

Credit: REUTERS/DADO RUVIC

SHANGHAI, March 6 (Reuters) - China's yuan held steady against the U.S. dollar on Wednesday, as the central bank set a daily midpoint guidance rate at its firmest in a month, while investors were waiting for a press conference later in the day for more policy clarity.

Prior to the market's 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 7.1016 per dollar, the firmest since Feb. 2 and 923 pips firmer than Reuters' estimate of 7.1939.

"The 7.20 level is now seen as a big resistance level anchored by PBOC fixings as authorities are unlikely to entertain any wild swings in the currency this week amidst the annual Two Sessions," said Alex Loo, macro strategist at TD Securities.

Parliamentarians and political advisers gather in Beijing every March for two parallel sets of meetings called the Lianghui or "Two Sessions".

The yuan has been capped below the 7.2 level against the dollar for the past month.

Meanwhile, investors will keep a close eye on an economy-focused press conference at 3 p.m. in Beijing (0700 GMT), where representatives from PBOC and other regulators may respond to media inquiries.

The spot yuan CNY=CFXS opened at 7.1949 per dollar and was changing hands at 7.1991 at midday, 21 pips weaker than the previous late session close.

The global dollar index .DXY was steady on Wednesday, as traders avoided making big bets ahead of congressional testimony from Federal Reserve Chair Jerome Powell and U.S. jobs data later this week.

The offshore yuan CNH=D3 was trading 128 pips weaker than the onshore spot at 7.2119 per dollar.

The yuan market at 0311 GMT:

ONSHORE SPOT:

Item

Current

Previous

Change

PBOC midpoint CNY=SAEC

7.1016

7.1027

0.02%

Spot yuan CNY=CFXS

7.1991

7.197

-0.03%

Divergence from midpoint*

1.37%

Spot change YTD

-1.41%

Spot change since 2005 revaluation

14.97%

Key indexes:

Item

Current

Previous

Change

Thomson Reuters/HKEX CNH index

0.0

Dollar index

103.8

103.798

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= *

7.2119

-0.18%

Offshore non-deliverable forwards CNY1YNDFOR= **

7.0078

1.34%

*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 Shanghai Newsroom; Editing by Jamie Freed)

((Li.Gu@thomsonreuters.com;))

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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