China Moves to Slow Yuan Rally by Cooling Fixing Volatility
Summarize this article with:
cv)q}edr31(mqgc4r5sonats_media_dl_1.png Bloomberg RSSArticle content(Bloomberg) — China’s central bank is using its daily reference rate to temper the yuan’s rally as the currency’s outperformance during the Iran war fuels further bullish sentiment.Sign In or Create an AccountEmail AddressContinueor View more offersArticle contentThe 10-day volatility of the yuan’s daily reference rate set by the People’s Bank of China declined sharply this week before touching the lowest level since early March, according to data compiled by Bloomberg.Article contentWe apologize, but this video has failed to load.Try refreshing your browser, ortap here to see other videos from our team.Article contentArticle contentDecreased volatility in the daily fixing — the midpoint that limits the yuan’s onshore moves to a 2% band — signals that China is discouraging fluctuations for the currency.Article contentTop StoriesGet the latest headlines, breaking news and columns.There was an error, please provide a valid email address.Sign UpBy signing up you consent to receive the above newsletter from Postmedia Network Inc.Thanks for signing up!A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againInterested in more newsletters? Browse here.Article contentThe move follows the yuan’s emergence as the sole gainer in Asia during the Middle East conflict thanks to China’s resilience to energy shocks. By anchoring the so-called fixing, the PBOC is pushing back against one-way bets on the yuan that threaten to blunt China’s export edge and derail the manufacturing recovery.Article content“The PBOC’s stance has turned neutral on the fixing management,” said Kiyong Seong, macro strategist at Societe Generale’s Hong Kong branch. “It has been successful to insulate the yuan from the global FX gyrations due to the war. But always, too fast yuan appreciation is not desired by them.”Article contentReflecting this cautious stance, the PBOC set the yuan fixing at 6.8622 per dollar on Friday, weakening it for a second straight session. The currency traded around 6.82, near a three-year high.Article contentGlobal investors are increasingly viewing China as a safe haven during the Middle East conflict. Bilal Hafeez, head of market strategy at Macro Hive Ltd., said buying the yuan is “one of my favorite calls right now,” forecasting the currency to reach 6.4 versus the greenback by year-end.Article contentArticle contentHowever, the PBOC is building up defenses against any runaway gains in the yuan. Earlier this week, it raised the cap on offshore loans for some banks, a move that’s expected to ease the appreciation pressure on the currency.Article contentBeyond policy signals, dollar purchases by Chinese state banks in recent sessions have helped blunt the yuan’s momentum. Record demand for foreign currencies from local firms last month may provide an additional headwind for the currency.Article content“I expect the PBOC to set the fixing slightly weaker than the consensus going forward,” Seong said.Article contentThe trajectory of the currency now hinges on the broader economic climate. However, the PBOC’s focus has shifted toward managing the pace of its advance given that the currency is widely seen as undervalued.Article contentThis approach aligns with the views of Wee Khoon Chong, BNY’s senior APAC market strategist, who said the PBOC’s aim has been to smooth out market volatility without drawing a line in the sand.Article content“Dollar-yuan will go through 6.8 and beyond,” Chong said, adding that “There is a bias in the market that the yuan rally is always too fast and too strong.”Article contentTrending Canadian quantum company Xanadu soars to $16 billion valuation after Nvidia release Innovation Posthaste: What Mark Carney's gas tax cut could mean for the Bank of Canada News A rise in mortgage rates may ‘pull the rug' out from under the spring housing market, says CREA Mortgages Canada presses for wider trade agreement in talks with U.S.
Economy The Great Correction: Not even Wayne Gretzky's hometown could escape the crash of the 'exurbs' Real Estate Share this article in your social networkCommentsYou must be logged in to join the discussion or read more comments.Create an AccountSign in Join the Conversation Postmedia is committed to maintaining a lively but civil forum for discussion. Please keep comments relevant and respectful. Comments may take up to an hour to appear on the site. You will receive an email if there is a reply to your comment, an update to a thread you follow or if a user you follow comments. Visit our Community Guidelines for more information. Canadian quantum company Xanadu soars to $16 billion valuation after Nvidia release Innovation Posthaste: What Mark Carney's gas tax cut could mean for the Bank of Canada News A rise in mortgage rates may ‘pull the rug' out from under the spring housing market, says CREA Mortgages Canada presses for wider trade agreement in talks with U.S.
Economy The Great Correction: Not even Wayne Gretzky's hometown could escape the crash of the 'exurbs' Real Estate