Yuan hits 11-week low ahead of Pelosi’s expected Taiwan visit

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

renegade province.

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:

ONSHORE SPOT:

Item Current Previous Change

PBOC midpoint 6.7462 6.7467 0.01%

Spot yuan 6.7686 6.7675 -0.02%

Divergence from 0.33%

midpoint*

Spot change YTD -6.11%

Spot change since 2005 22.28%

revaluation

Key indexes:

Item Current Previous Change

Thomson 0.0

Reuters/HKEX

CNH index

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

morning.

OFFSHORE CNH MARKET

Instrument Current Difference

from onshore

Offshore spot yuan 6.7799 -0.17%

*

Offshore 6.7353 0.16%

non-deliverable

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 Shanghai newsroom; Editing by Christopher

Cushing)