US Markets

Yuan weakens on stalled trade review as PMI buoys dollar

Credit: REUTERS/KIM KYUNG-HOON

China's yuan eased against the dollar on Monday morning, as the U.S. currency rebounded on better-than-expected manufacturing activity data.

SHANGHAI, Aug 24 (Reuters) - China's yuan eased against the dollar on Monday morning, as the U.S. currency rebounded on better-than-expected manufacturing activity data.

While U.S. President Donald Trump raised the possibility of decoupling the U.S. economy from China in an interview over the weekend and there was no breakthrough on a U.S.-China trade review, yuan market sentiment appeared unruffled.

The yuan changed hands at 6.9201 in the spot market at midday, 11 pips lower than Friday's late session close.

Prior to market open, the People's Bank of China set the midpoint rate CNY=PBOC at 6.9194 per dollar, weaker than the previous fix of 6.9107.

Sentiment for the greenback has improved somewhat due to supportive data on business activity and home sales, reinforcing prospects for economic recovery in the world's largest economy.

The U.S. flash manufacturing PMI for August exceeded expectations, while a similar survey for the eurozone was worse than expected, according to Ken Cheung, chief Asian FX strategist at Mizuho Bank.

Investors are now keenly awaiting Federal Reserve Chair Jerome Powell's address at this week's Jackson Hole symposium, where he will give a review of the Fed's monetary policy framework.

Mizuho's Cheung said yuan investors remained calm even as China and the United States failed to hold a review of the delayed Phase 1 deal over the weekend.

"The consequence of further delay in the trade talks is not devastating as the China-U.S. trade deal is supposed to remain intact as long as China keeps buying U.S. agricultural goods," he wrote.

The Thomson Reuters/HKEX Global CNH index .RXYH, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 92.47, firmer than the previous day's 92.39.

The global dollar index =USD rose to 93.234 from the previous close of 93.198.

The offshore yuan CNH=D3 was trading 0.05 percent away from the onshore spot at 6.9165 per dollar.

One-year NDFs are settled against the midpoint, not the spot rate.

The yuan market at 4:19AM GMT:

ONSHORE SPOT:

Item

Current

Previous

Change

PBOC midpoint CNY=SAEC

6.9194

6.9107

-0.13%

Spot yuan CNY=CFXS

6.9203

6.919

-0.02%

Divergence from midpoint*

0.01%

Spot change YTD

0.62%

Spot change since 2005 revaluation

19.60%

Key indexes:

Item

Current

Previous

Change

Thomson Reuters/HKEX CNH index

92.47

92.39

0.1

Dollar index

93.234

93.198

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= *

6.9165

0.05%

Offshore non-deliverable forwards CNY1YNDFOR= **

7.0696

-2.12%

*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 Samuel Shen and Andrew Galbraith; Editing by Jacqueline Wong)

((samuel.shen@thomsonreuters.com; +86 21 20830018; Reuters Messaging: samuel.shen.thomsonreuters.com@reuters.net))

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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