China’s yuan firms on bullish loan data, but zero-COVID stance dims outlook

Author of the article: SHANGHAI — China’s yuan firmed against the dollar on Wednesday, aided by faster-than-expected credit Financial Post Top Stories Sign up to receive the daily top stories from the Financial Post, a division of Postmedia Network Inc. By clicking on the sign up button you consent to receive the above newsletter from…
China’s yuan firms on bullish loan data, but zero-COVID stance dims outlook

Author of the article:

SHANGHAI — China’s yuan firmed against

the dollar on Wednesday, aided by faster-than-expected credit

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growth in September, the central bank’s vow to curb any big

currency swings, and a steady midpoint fixing for the currency.

On the whole, however, the yuan’s upside was contained

by a buoyant dollar, global recession risks, and Beijing’s

continued zero-COVID commitment amid fresh outbreaks.

The onshore yuan was changing hands at 7.1671 at

midday, a tad stronger than the previous late session close,

after the People’s Bank of China set the midpoint rate

at 7.1103 per dollar, little changed from the

previous day.

“The steady CNY fixing … should help anchor RMB

expectation and prevent the one-way RMB movement,” Mizuho Bank

strategist Ken Cheung wrote in a client note.

Sentiment was also aided by data showing new bank lending in

China nearly doubled in September from the previous month, far

exceeding expectations.

Late on Tuesday, PBOC said it will take steps to stabilize

expectations, and keep the yuan basically stable, vowing to

“resolutely curb big ups and downs in exchange rates.”

The dollar index rose to near two-week highs of

113.59 on Wednesday.

But pressure on the yuan remains.

China will persist with its COVID-19 policies to avoid

losing control over local coronavirus outbreaks, the official

newspaper of the ruling Communist Party warned in a commentary

for the third straight day.

The International Monetary Fund on Tuesday cut its 2022 and

2023 economic growth forecasts for China to 3.2% and 4.4%,

respectively, saying the frequent lockdowns under the country’s

zero-COVID policy have taken a toll on its economy.

“China’s growth recovery is still facing headwinds from

COVID-19 uncertainty, a sluggish consumption recovery and signs

of slower external demand,” HSBC Greater China economist Erin

Xin wrote in a client note on Wednesday.

The yuan market at 4:46AM GMT:

ONSHORE SPOT:

Item Current Previous Change

PBOC midpoint

-0.04%

7.1103 7.1075

Spot yuan

7.168 0.01%

7.1675

Divergence from

midpoint*

0.80%

Spot change YTD

-11.34%

Spot change since 2005

revaluation 15.47%

Key indexes:

Item Current Previous Change

Thomson

Reuters/HKEX 0.0

CNH index

Dollar index

113.249 0.0

113.221

*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

morning.

OFFSHORE CNH MARKET

Instrument Current Difference

from onshore

Offshore spot yuan

* -0.03%

7.1694

Offshore

non-deliverable 7.048 0.88%

forwards

**

*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 Samuel Shen and Shanghai newsroom

Editing by Shri Navaratnam)

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