HONG KONG —
China’s yuan weakened slightly against the dollar on
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Wednesday, as factory gate prices went backwards and consumer
inflation slowed, adding to traders’ concerns about demand and
the economic outlook.
The People’s Bank of China set the midpoint rate
at 7.2189 per dollar prior to market open, weaker than the
previous fix 7.215.
In the onshore market, the yuan opened at 7.2322
per dollar and was changing hands at 7.2464 at midday, 144 pips
away from the previous late session close and 0.38% away from
the midpoint. The spot rate is currently allowed to trade within
a 2% band above or below the official fixing on any given day.
The global dollar index rose to 109.681 from the
previous close of 109.636, as traders awaited results from U.S.
mid-term elections and inflation data.
China reported on Wednesday its producer price index fell
1.3% year-on-year in October, its first drop since December
2020, underlining production disruptions amid strict COVID curbs
and a weak property sector.
The consumer price index (CPI) climbed 2.1% year-on-year,
cooling from a 2.8% rise in September and slower than analysts’
“China’s weak activity data, soft non-food price inflation
indicates an economy suffering from weak demand,” said Stephen
Innes, managing partner at SPI Asset Management.
The soft inflation means authorities may be more comfortable
with yuan weakness, albeit at a pace that does not encourage
outflows, he said.
A trade-weighted yuan basket index complied by China Foreign
Exchange Trade System, the which tracks the onshore yuan against
24 foreign currencies, fell to 98.63, lowest since Sept. 10,
The offshore yuan was trading at
per dollar, close to the onshore spot rate.
The market has seized on incremental policy adjustments as
evidence that China is preparing for an eventual economic
reopening. Such bets had triggered the biggest jump on record in
the offshore yuan last week.
However, “optimism on the China reopening was waning as the
COVID resurgence in reality fueled concern over the escalation
in lockdowns, especially in the Guangdong province,” said Ken
Cheung, chief Asian FX strategist at Mizuho Bank.
“We pay attention to the possible disinflation trend driven
by weakening demand amid the zero-COVID policy and property
downturn,” he said.
Offshore one-year non-deliverable forwards contracts
(NDFs), considered the best available proxy for
forward-looking market expectations of the yuan’s value, traded
at 7.0468, 2.44% away from the midpoint.
One-year NDFs are settled against the midpoint, not the spot
The yuan market at 4:37AM GMT:
Item Current Previous Change
Spot change YTD
Spot change since 2005
Item Current Previous Change
*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
*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 Georgina Lee. Editing by Sam Holmes)