SHANGHAI — The yuan hit an 11-week low
against the greenback on Tuesday as diplomatic tension ahead of
an expected Taiwan visit by U.S. House of Representatives
Speaker Nancy Pelosi pressured the Chinese currency.
The U.S. politician was set to arrive in Taipei later in the
day, people briefed on the matter said, as the United States
said it would not be intimidated by Chinese “saber rattling”
over a visit to a self-governing island that China regards as a
Onshore yuan touched 6.7835 per U.S. dollar in
morning trade, its lowest since May 16, before recouping some
losses. Offshore yuan fell as far as 6.7945.
Yuan weakness comes even as the greenback eased overnight
on signs U.S. economic activity was moderating,
strengthening expectations for the Federal Reserve to slow its
pace of monetary tightening.
Pelosi’s Taiwan visit “would certainly have a negative
impact on market sentiment,” said hedge fund manager Yuan Yuwei
at Water Wisdom Asset Management.
But the biggest risk to the currency is China’s economic
fragility amid tough COVID-19 containment policies, though
dollar weakness could lend short-term support, he said.
Latest factory activity data showed China’s wobbly economy
stumbled further at the start of the second half of the year
with factories reducing output, a slump in the property sector
deepening and job cuts widespread.
Fund manager Yuan also said increasing willingness from
U.S.-sanctioned Russia to use the Chinese currency is a positive
for its value.
Russian aluminum producer RUSAL on Friday said it had
become the first company to issue yuan bonds in Russia.
The yuan market at 0442 GMT:
Item Current Previous Change
PBOC midpoint 6.7462 6.7467 0.01%
Spot yuan 6.7686 6.7675 -0.02%
Divergence from 0.33%
Spot change YTD -6.11%
Spot change since 2005 22.28%
Item Current Previous Change
Dollar index 105.247 105.45 -0.2
*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 6.7799 -0.17%
Offshore 6.7353 0.16%
*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 Shanghai newsroom; Editing by Christopher
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