SHANGHAI, Oct.15 – China’s yuan slipped Thursday as data showed that Chinese inflation remained weak despite a broader economic recovery, while ongoing tensions between China and the US also weighed on. China has steadily recovered since it was hit hard by the coronavirus pandemic earlier this year. Data showing factory gate prices fell faster than expected in September and consumer inflation fell to its lowest level in 19 months underscored some of the challenges facing the world’s second largest economy. There were also concerns that a move by the Trump administration to appoint a senior U.S. human rights officer as special coordinator on Tibetan issues could further exacerbate tensions between Washington and Beijing. “It is worth watching if deepening PPI deflation signals a weakening of the recovery in China. Overall, developments in CPI inflation are unlikely to limit the PBOC’s ability to ease further, ”Ken Cheung, chief Asian FX strategist at Mizuho, said in a report. Before the market opened, the People’s Bank of China set the median at 6.7374 per dollar, 99 pips firmer than the previous fix of 6.7473. The spot market opened at 6,7300 per dollar and changed hands at 6,7235 a.m., 99 pips lower than at the end of the previous session. Traders said the yuan was tied to range in the short term following changes in PBOC policy and became more susceptible to changes in the US dollar. The PBOC over the weekend removed the requirement for banks to hold a reserve of yuan futures contracts. The dollar rose slightly on Thursday as rising coronavirus cases and little progress on the way to a US economic deal unsettled investors. Politically, the People’s Bank of China (PBOC) said in a statement that it is holding the interest rate on one-year loans to medium-term credit facilities (MLF) to financial institutions constant at 2.95% from previous operations. China’s new bank lending grew faster than expected in September, driven by a surge in corporate lending. The Thomson Reuters / HKEX Global CNH index, which shows the offshore yuan against a basket of currencies daily, was 94.82, firmer than the previous day’s 94.63. The global dollar index fell from 93.429 to 93.421 from its previous closing price. The offshore yuan was trading at 6.7183 per dollar by noon. One-year offshore futures contracts (NDFs), believed to be the best available proxy for forward market expectations of the yuan value, traded at 6.8869, down -2.17 percent from midpoint. Annual NDFs are settled against the midpoint and not against the spot rate. The yuan market at 4:04 p.m. GMT: ONSHORE SPOT: Item Current Previous Change PBOC Midpoint 6.7374 6.7473 0.15% Spot Yuan 6.7235 6.7136 -0.15% deviation from -0, 21% midpoint * spot change YTD 3.57% spot change since 2005 23.10% revaluation key indices: position Current previous change Thomson 94.82 94.63 0.2 Reuters / HKEX CNH index dollar index 93.421 93.429 0.0 * Deviation in the dollar / yuan exchange rate. A negative number indicates that the spot yuan is trading stronger than the midpoint. The People’s Bank of China (PBOC) allows the exchange rate to rise or fall 2% from the official morning rate it sets every morning. OFFSHORE CNH MARKET Instrument power difference to onshore offshore spot yuan 6.7183 0.08% * Offshore 6.8869 -2.17% non-deliverable forwards ** * Premium for offshore spot via onshore ** The figure reflects the difference to official midpoint of PBOC as undeliverable forwards are offset against the midpoint. . (Reporting by Luoyan Liu, Jindong Zhang and Andrew Galbraith; editing by Ana Nicolaci da Costa).
–
