China's yuan slips after US strike on Syria, Trump-Xi meet in focus
SHANGHAI: China's yuan slipped against the US dollar on Friday as the US launched missile strikes against a Syrian airbase, adding to an already tense backdrop as the first meeting between President Xi Jinping and US President Donald Trump got underway.
The People's Bank of China set the midpoint rate at 6.8949 per dollar prior to market open, weaker than the previous fix 6.893.
The spot market opened at 6.8988 per dollar and was changing hands at 6.9005 at midday, 25 pips away from the previous late session close and 0.08 per cent away from the midpoint.
Safe-haven assets rose in Asia, led by bonds and the yen, and stocks were sold off after the United States launched cruise missiles against an air base in Syria, raising the risk of confrontation with Syrian backers Russia and Iran.
The impact on the yuan, however, was limited. A Shanghai-based trader noted the Syrian civil war has been a protracted affair and sees few negatives for the yuan from that conflict.
The focus was squarely on the first meeting between Xi and Trump - which began on Thursday at Trump's Spanish-style Mar-a-Lago resort in Palm Beach, Florida - with trade and security issues expected to feature prominently.
The trader said markets were optimistic the US and China will reach compromise to cooperate on economic issues as well as matters such as North Korea's nuclear ambitions.
Also helping to ease pressure on the yuan, Trump looks unlikely to formally declare China a currency manipulator next week, foreign exchange policy experts say.
The US Treasury would have to radically change its definitions of currency manipulation in order to squeeze China into that label for its next report due on April 14, said these experts, several of whom contributed to past Treasury analysis of foreign exchange practices.
After slumping 6.5 per cent against the dollar in 2016, the Chinese currency has regained composure so far this year, advancing 0.7 per cent and fluctuating in the 6.8295-6.9628 range.
The dollar index, which measures dollar's value against major world currencies, was flat at 100.67 after the US strikes on Syria.
The Shanghai trader said he was relatively optimistic the country's foreign reserves data for March, due later today, will underpin the yuan.
Data today is expected to show China's foreign exchange reserves edged up to $3.01 trillion in March, the second modest month of gains in a row. They rebounded above the closely watched $3 trillion level in February for the first time in eight months.
Other data in coming weeks are expected to show China posted solid economic growth in March, with exports picking up and manufacturing firms benefiting from a months-long construction boom.
The yuan market at 5:32AM GMT:
ONSHORE SPOT:
Item Current Previous Change
PBOC midpoint 6.8949 6.893 -0.03%
Spot yuan 6.9005 6.898 -0.04%
Divergence from 0.08%
midpoint*
Spot change YTD 0.67%
Spot change since 2005 19.94%
revaluation
Key indexes:
Item Current Previous Change
Thomson 94.34 94.36 0.0
Reuters/HKEX
CNH index
Dollar index 100.67 100.67 0.0
*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 per cent from official midpoint rate it sets each morning.
OFFSHORE CNH MARKET
Instrument Current Difference
from onshore
Offshore spot yuan 6.8954 0.07%
*
Offshore 7.0955 -2.83%
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.
The People's Bank of China set the midpoint rate at 6.8949 per dollar prior to market open, weaker than the previous fix 6.893.
The spot market opened at 6.8988 per dollar and was changing hands at 6.9005 at midday, 25 pips away from the previous late session close and 0.08 per cent away from the midpoint.
Safe-haven assets rose in Asia, led by bonds and the yen, and stocks were sold off after the United States launched cruise missiles against an air base in Syria, raising the risk of confrontation with Syrian backers Russia and Iran.
The impact on the yuan, however, was limited. A Shanghai-based trader noted the Syrian civil war has been a protracted affair and sees few negatives for the yuan from that conflict.
The focus was squarely on the first meeting between Xi and Trump - which began on Thursday at Trump's Spanish-style Mar-a-Lago resort in Palm Beach, Florida - with trade and security issues expected to feature prominently.
The trader said markets were optimistic the US and China will reach compromise to cooperate on economic issues as well as matters such as North Korea's nuclear ambitions.
Also helping to ease pressure on the yuan, Trump looks unlikely to formally declare China a currency manipulator next week, foreign exchange policy experts say.
The US Treasury would have to radically change its definitions of currency manipulation in order to squeeze China into that label for its next report due on April 14, said these experts, several of whom contributed to past Treasury analysis of foreign exchange practices.
After slumping 6.5 per cent against the dollar in 2016, the Chinese currency has regained composure so far this year, advancing 0.7 per cent and fluctuating in the 6.8295-6.9628 range.
The dollar index, which measures dollar's value against major world currencies, was flat at 100.67 after the US strikes on Syria.
The Shanghai trader said he was relatively optimistic the country's foreign reserves data for March, due later today, will underpin the yuan.
Data today is expected to show China's foreign exchange reserves edged up to $3.01 trillion in March, the second modest month of gains in a row. They rebounded above the closely watched $3 trillion level in February for the first time in eight months.
Other data in coming weeks are expected to show China posted solid economic growth in March, with exports picking up and manufacturing firms benefiting from a months-long construction boom.
The yuan market at 5:32AM GMT:
ONSHORE SPOT:
Item Current Previous Change
PBOC midpoint 6.8949 6.893 -0.03%
Spot yuan 6.9005 6.898 -0.04%
Divergence from 0.08%
midpoint*
Spot change YTD 0.67%
Spot change since 2005 19.94%
revaluation
Key indexes:
Item Current Previous Change
Thomson 94.34 94.36 0.0
Reuters/HKEX
CNH index
Dollar index 100.67 100.67 0.0
*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 per cent from official midpoint rate it sets each morning.
OFFSHORE CNH MARKET
Instrument Current Difference
from onshore
Offshore spot yuan 6.8954 0.07%
*
Offshore 7.0955 -2.83%
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.
