China's yuan inches up as tax reform uncertainty weakens dollar
Reuters|
Updated: Nov 08, 2017, 11.33 AM IST
SHANGHAI: China's yuan inched up against the US dollar in thin trade on Wednesday, supported by some weakness in the greenback in global markets, traders said.
The dollar slipped on Wednesday morning, weighed by a media report that suggested a centrepiece corporate tax cut under discussion in US tax reforms plans could be delayed.
Market participants said China's trade data for October released on Wednesday morning had little impact on the onshore yuan trade. Exports lagged market expectations, rising 6.9 per cent from a year earlier while imports beat forecasts, growing 17.2 per cent, official data showed.
Iris Pang, an economist at ING, said there was no evidence that a stronger Chinese currency has hurt exports since 2013, while US President Donald Trump's visit to Beijing could put some political heat on China trade.
"We believe that if there is any trade sanctions or similar threats that the US puts on China, then China would retaliate either in the form of trade or imposing hurdles to US companies operating in China," she said in a note.
Trump is set to start his three-day state visit in Beijing on Wednesday.
Prior to market opening on Wednesday, the People's Bank of China lowered the midpoint rate to 6.6277 per dollar, 61 pips or 0.09 per cent weaker than the previous fix of 6.6216 on Tuesday.
In the spot market, the onshore yuan opened at 6.6370 per dollar and was changing hands at 6.6378 at midday, 17 pips firmer than the previous late session close.
Traders said the PBOC's recent official guidance rates came in line with their forecasts, leaving yuan trade largely determined by corporate flows and broad dollar movement in global markets.
A trader at a Chinese bank said corporate dollar demand and supply were largely balanced on Wednesday morning.
Another Shanghai-based trader at a Chinese bank said seasonal corporate demand for the dollar should emerge soon as some companies had to purchase greenback to fulfill their financing needs in the middle of the month.
Official data showed on late Tuesday that China's foreign exchange reserves rose in October for a ninth straight month, but at a slower pace than market expectations, as tighter regulations and a stronger yuan continued to discourage capital outflows.
The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 95.89, weaker than the previous day's 96.02.
The global dollar index fell to 94.832 from the previous close of 94.913.
The offshore yuan was trading 0.05 per cent weaker than the onshore spot at 6.6410 per dollar.
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 6.7825, 2.28 per cent weaker than the midpoint.
The dollar slipped on Wednesday morning, weighed by a media report that suggested a centrepiece corporate tax cut under discussion in US tax reforms plans could be delayed.
Market participants said China's trade data for October released on Wednesday morning had little impact on the onshore yuan trade. Exports lagged market expectations, rising 6.9 per cent from a year earlier while imports beat forecasts, growing 17.2 per cent, official data showed.
Iris Pang, an economist at ING, said there was no evidence that a stronger Chinese currency has hurt exports since 2013, while US President Donald Trump's visit to Beijing could put some political heat on China trade.
"We believe that if there is any trade sanctions or similar threats that the US puts on China, then China would retaliate either in the form of trade or imposing hurdles to US companies operating in China," she said in a note.
Trump is set to start his three-day state visit in Beijing on Wednesday.
Prior to market opening on Wednesday, the People's Bank of China lowered the midpoint rate to 6.6277 per dollar, 61 pips or 0.09 per cent weaker than the previous fix of 6.6216 on Tuesday.
In the spot market, the onshore yuan opened at 6.6370 per dollar and was changing hands at 6.6378 at midday, 17 pips firmer than the previous late session close.
Traders said the PBOC's recent official guidance rates came in line with their forecasts, leaving yuan trade largely determined by corporate flows and broad dollar movement in global markets.
A trader at a Chinese bank said corporate dollar demand and supply were largely balanced on Wednesday morning.
Another Shanghai-based trader at a Chinese bank said seasonal corporate demand for the dollar should emerge soon as some companies had to purchase greenback to fulfill their financing needs in the middle of the month.
Official data showed on late Tuesday that China's foreign exchange reserves rose in October for a ninth straight month, but at a slower pace than market expectations, as tighter regulations and a stronger yuan continued to discourage capital outflows.
The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 95.89, weaker than the previous day's 96.02.
The global dollar index fell to 94.832 from the previous close of 94.913.
The offshore yuan was trading 0.05 per cent weaker than the onshore spot at 6.6410 per dollar.
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 6.7825, 2.28 per cent weaker than the midpoint.
