SHANGHAI, Feb 23 (Reuters) –China’s yuan eased slightly against the U.S. dollar on Friday as its new home prices fell for the seventh straight month, while market participants are also watching the 2024 U.S. presidential election for clues on the direction of the yuan during the year.
China’s January new home prices fell, official data showed on Friday, even as policymakers stepped up support to restore confidence in the debt-ridden property sector.
Meanwhile, the 2024 U.S. election has drawn market participants’ attention as it may have an impact on the yuan starting in mid-2024.
“The Trump factor in the FX market has started to make itself felt with the ratio of USD/CNH 9-month implied volatilities to either 6-month or 3-month volatilities breaking to the highest levels since before the pandemic,” said Alvin Tan, head of Asia FX strategy at RBC Capital Markets.
“There is still not much impact on the spot FX market, but the Trump factor could start to be a factor to support USD/Asia pairs starting in mid-2024,” Tan said.
Prior to the market’s opening, the People’s Bank of China set the midpoint rate CNY=PBOC, around which the yuan is allowed to trade in a 2% band, at 7.1064 per U.S. dollar, 46 pips weaker than the previous fix 7.1018.
The spot yuan CNY=CFXS opened at 7.1925 per dollar and was changing hands at 7.1963 at midday, 26 pips weaker than the previous late session close.
Recent moves in China’s stock market are also weighing on the yuan’s sentiment.
China’s Shanghai SE Composite Index .SSEC rose above the psychologically key 3000-point mark in early trades, before entering the midday break roughly flat. Beijing has rolled out a raft of measures to prop up its ailing stock market.
The U.S. dollar held steady after the U.S. Federal Reserve officials expressed caution on rate cuts.
The global dollar index .DXY fell slightly to 103.93 from the previous close of 103.957.
The offshore yuan CNH=D3 was trading 107 pips weaker than the onshore spot at 7.207 per dollar.
The yuan market at 0332 GMT:
ONSHORE SPOT:
|
Item |
Current |
Previous |
Change |
|
PBOC midpoint CNY=SAEC |
7.1064 |
7.1018 |
-0.06% |
|
Spot yuan CNY=CFXS |
7.1963 |
7.1937 |
-0.04% |
|
Divergence from midpoint* |
1.27% |
||
|
Spot change YTD |
-1.37% |
||
|
Spot change since 2005 revaluation |
15.01% |
||
Key indexes:
|
Item |
Current |
Previous |
Change |
|
Thomson Reuters/HKEX CNH index |
0.0 |
||
|
Dollar index |
103.93 |
103.957 |
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= * |
7.207 |
-0.15% |
|
Offshore non-deliverable forwards CNY1YNDFOR= ** |
7.0005 |
1.51% |
*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 Muralikumar Anantharaman