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China’s yuan eases ahead of bumper global central bank week


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SHANGHAI — China’s yuan eased against the

greenback on Monday and traded on the weaker side of the

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psychologically critical 7 per dollar level, pressured by

Federal Reserve’s widely anticipated interest rate hike late

this week.

Prior to market opening, the People’s Bank of China (PBOC)

set the midpoint rate at 6.9396 per dollar, 91 pips

or 0.13% weaker than the previous fix of 6.9305 on Friday.

However, the official guidance came in firmer than market

projections, traders and analysts said, continuing a trend in

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place since late August in what market participants interpret as

a bid to slow the yuan’s slide.

“The strong fixing bias could also be an attempt to offset

the pressure from the net open market operation (OMO) injection

on the yuan,” analysts at Maybank said in a note.

The PBOC injected a net 12 billion yuan ($1.71 billion)

through short-term liquidity tools on Monday to counteract

quarter-end higher cash demand, while also lowering the

borrowing cost of 14-day reverse repos.

Higher cash injections and lower interest rates should

naturally pressure the currency, analysts said.

In the spot market, the onshore yuan opened at

6.9900 per dollar and was changing hands at 7.0080 at midday,

375 pips weaker than the previous late session close.

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Its offshore counterpart traded at 7.0128 per

dollar around midday.

Currency traders said the yuan remained under pressure ahead

of a slew of global central bank meetings this week, where the

Fed and the Bank of England are expected to further hike rates.

China, along with Japan, has been a major outlier in a

global run of interest rate hikes to tame inflation with Beijing

focused on reviving the economy hurt by COVID-19 shocks. But

such widening policy divergence weighed on the yuan.

“Different from the past few rounds of RMB depreciation, the

collapse of RMB forward points makes RMB short easy to hold due

to positive carry,” analysts said OCBC Bank said in a note.

“This will make China’s counter-cyclical measures less

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effective to stop RMB depreciation as what they did before.”

One-year dollar/yuan swap points traded in the

forward market hovered at a 12-year low of -1,395 points on


Instead, state media have geared up warning the market of

strong one-way bets against the local currency, with traders and

analysts viewing them as part of official attempts to rein in

excess yuan weakness.

Wang Chunying, spokesperson of the State Administration of

Foreign Exchange (SAFE), was quoted by the state broadcaster

CCTV on Friday urging companies not to speculate on the


And the CCTV also quoted unnamed sources close to the

central bank as saying that the yuan will maintain basically


The yuan market at 0401 GMT:

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Item Current Previous Change

PBOC midpoint 6.9396 6.9305 -0.13%

Spot yuan 7.008 6.9705 -0.54%

Divergence from 0.99%


Spot change YTD -9.32%

Spot change since 2005 18.10%


Key indexes:

Item Current Previous Change

Thomson 0.0


CNH index

Dollar index 109.836 109.764 0.1

*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



Instrument Current Difference

from onshore

Offshore spot yuan 7.0128 -0.07%


Offshore 6.9185 0.30%




*Premium for offshore spot over onshore

**Figure reflects difference from PBOC’s official midpoint,

since non-deliverable forwards are settled against the midpoint.


(Reporting by Winni Zhou and Brenda Goh; Editing by Sam Holmes)



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