China’s yuan falls to near 6-month low, giving up YTD gains against basket

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SHANGHAI/SINGAPORE — Chinese Yuan

weakened to a near six-month low against the dollar on Wednesday,

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and give up all the profits it made this year for a basket

currencies of trading partners amid new tensions in

Sino-American relations.

Traders said the yuan was also pressured by strong demand

took dollars, but they did not detect any move by state banks

to slow down the rate of currency decline.

“The speed of the yuan’s devaluation may be more important now

than any specific level,” said a trader at a foreign bank.

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On Tuesday, the Speaker of the United States House of Representatives

committee on China, said the US Department of Commerce should put

Trade restraints on Chinese memory chip maker Changxin Memory

Technologies (CXMT) after Beijing earlier this week banned

the sale of certain chips by Micron Technology Inc. based in the United States.

China’s Cyberspace Regulatory Restrictions Against

Micron is the latest in an ever-expanding trade dispute between

the world’s two largest economies.

Prior to market opening, the People’s Bank of China (PBOC)

midpoint at near six-month low of 7,0560

per dollar, 234 pips or 0.33% weaker than the previous fix of

7.0326.

Wednesday’s fix price is 6 pips higher than Reuters estimates

of 7.0566. Currency traders say official guidance is available in

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match their expectations.

“The absence of pushback from policymakers through daily reporting

The yuan fix has created the impression that policymakers may be moving in the right direction

discuss allowing the market to play a larger role in price

discovery,” said Christopher Wong, FX strategist at OCBC Bank.

“To some extent, these seem to indicate a devaluation of the renminbi in the

an ‘orderly manner’ can also fall within the acceptable limits of

policy makers.”

Midpoint fixation weakens, leading to trade weight

CFETS yuan basket index fell to 98.51, the lowest level

as of December 26, 2022, effectively wiping out annual returns.

In the spot market, the domestic yuan opened at

7,0650 per dollar and weakened to as low as 7,0693 at a time,

weakest since December 1, 2022. It was last traded at 7.0577 at

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midday, 26 pips softer than the previous closing closing price.

Separately, traders said traditional dividend payments

the season will start soon and put further pressure on the yuan, because of China

Foreign-listed companies generally have a higher demand for foreign exchange between

May and July for payments to their foreign shareholders.

The state economic daily said in a commentary on

Fourth, the yuan is unlikely to appreciate strongly

fluctuations such as China’s economic foundation, balance of payments

and foreign exchange reserves were generally stable.

By midday, the global dollar index drops to 103.465

from the previous close of 103,488, while the yuan went offshore

was trading at 7.0668 per dollar.

The RMB market at 04:00 GMT:

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POINT ON BOARD:

Current Item Previous Change

midpoint of PBOC 7,056 7.0326 -0.33%

Yuan Spot 7.0577 7.0551 -0.04%

Spread from 0.02%

midpoint*

YTD Spot Change -2.23%

Score change since 2005 17.27%

re-evaluate

Key metrics:

Current Item Previous Change

Dollar Index 103.465 103.488 0.0

*Difference of the dollar/yuan exchange rate. Negative

indicates that the spot yuan is trading stronger than the midpoint.

People’s Bank of China (PBOC) allows exchange rate

2% increase or decrease from the official average rate it sets per

morning.

FOREIGN MARKETS

Instrument current difference

from the shore

Overseas spot yuan 7.0668 -0.13%

*

Offshore 6,876 2.62%

Unable to deliver

forward

**

*Premium for points offshore vs onshore

**Pictures reflect differences from the official PBOC midpoint,

as non-deliverable maturities are settled on the midpoint.

.

(Reporting by Winni Zhou and Tom Westbrook; Editing by

Jacqueline King)