SHANGHAI — China’s yuan eased against the
greenback on Monday and traded on the weaker side of the
psychologically critical 7 per dollar level, pressured by
Federal Reserve’s widely anticipated interest rate hike late
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
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.
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
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:
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%
Item Current Previous Change
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
OFFSHORE CNH MARKET
Instrument Current Difference
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)