China's yuan slips from 3-week high on US election uncertainty
SHANGHAI, Nov 5 (Reuters) -China's yuan slipped on Tuesday, retreatingfrom a three-week high against the dollar hit a day earlier, as some investors rushed to book profit amid uncertainty around the U.S. presidential election.
Markets were also anxiously awaitingoutcomes of the Federal Reserve rate decision and a meeting of China's top legislative body this week.
As of 0308 GMT, the yuan CNY=CFXS was 0.06% lower at 7.1052 to the dollar after hitting a high of 7.0858 per dollar on Monday, which was the strongest level since Oct. 14.
Its offshore counterpart CNH=D3 traded at 7.1068 yuan per dollar.
Opinion polls show both former President Donald Trump and Vice President Kamala Harris virtually even.
As part of his pitch to boost American manufacturing, Trump has promised voters he will impose tariffs of 60% or more on goods from China. Trump's proposed tariff and tax policies are seen as inflationary and therefore likely to keep U.S. interest rates high and undermine currencies of trading partners.
"Voting starts later today, but it could be Thursday or Friday Asia time before we have more of an idea of who will likely emerge as the winner of this very tightly contested election," analysts at ING said in a note.
"Markets are likely to be volatile in the meantime."
One-week implied volatility for the offshore yuan CNHSWO=, a measure of options pricing and how far markets think the exchange rate could move in coming week, remained elevated on Tuesday after hitting its highest on record a day earlier.
Some currency traders said they already squared their proprietary accounts while some corporate clients noted that they would wait till a clearer picture of the election result.
Prior to markets opening, the People's Bank of China (PBOC) set the midpoint rate CNY=PBOC, around which the yuan is allowed to trade in a 2% band, at 7.1016 per dollar, its strongest since Oct. 21, and 3 pips firmer than a Reuters' estimate CNY=RTRS of 7.1019.
Separately, in China, Chinese lawmakers reviewed a cabinet bill that would raise ceilings on local government debt to replace existing hidden debt as the standing committee of China's top legislature started their meeting on Monday, state media Xinhua reported.
Currency traders said they would switch their attention to the meeting, which is scheduled to convene from Nov. 4-8, later this week as markets had expected more fiscal stimulus moves to be approved at the meeting to lift the economy.
LEVELS AT 0308 GMT:
INSTRUMENT | CURRENT vs USD | UP/DOWN(-) VS. PREVIOUS CLOSE % | % CHANGE YR-TO-DATE | DAY'S HIGH | DAY'S LOW |
Spot yuan CNY=CFXS | 7.1052 | -0.06 | -0.05 | 7.103 | 7.1114 |
Offshore yuan spot CNH=D3 | 7.1069 | 0.09 | 0.26 | 7.105 | 7.1169 |
Reporting by Shanghai Newsroom; Editing by Lincoln Feast.
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