HONG KONG: China’s yuan was little changed near seven-month lows against the US dollar on Wednesday, as a vow by the central bank to prevent the yuan fluctuating too much partially offset weak sentiment.
China will stick to a supportive monetary policy stance and “resolutely prevent the exchange rate overshooting”, People’s Bank of China (PBOC) Governor Pan Gongsheng told the Lujiazui Forum in Shanghai on Wednesday.
Meanwhile, Zhu Hexin, head of the State Administration of Foreign Exchange (SAFE), told the same Forum that China’s forex market is resilient.
By 0340 GMT, the yuan was 0.03% lower at 7.2559 to the dollar after trading in a range of 7.2548 to 7.2564.
Prior to the market opening, the People’s Bank of China set the midpoint rate, around which the yuan is allowed to trade in a 2% band, at 7.1159 per dollar, its weakest since Jan. 19 and 1,323 points firmer than a Reuters’ estimate.
The spot yuan opened at 7.2550 per dollar and was last trading 3 pips firmer than the previous late session close and 1.97% weaker than the midpoint.
Despite the softening dollar, disappointing Chinese economic data has been weighing on the yuan’s performance.
Lemon Zhang, FX & EM Macro Strategist at Barclays, expects the yuan to continue to grind lower at a gradual pace engineered by PBOC.
“Recent real activity data in China has not been encouraging, and we think CNY assets are running ahead of fundamentals,” Zhang said.
China’s yuan holds near 7-month low as strong fixing offsets mixed economic data
She added that seasonal needs for Hong Kong-listed Chinese firms to convert the offshore yuan to Hong Kong dollars for dividend payouts were also negative for the yuan.
The yuan is down 0.2% against the dollar this month, and 2.1% weaker this year.
The offshore yuan traded at 7.2713 yuan per dollar, up about 0.01% in Asian trade.
Chinese government 10-year bond yields fell 0.1 basis points to 2.26%.
The yield on similar US government benchmark debt was 4.2%. The yuan onshore 7-day benchmark repo rate was at 1.87%.
The dollar’s six-currency index stood flat at 105.270.
American Dollar Exchange Rate