China's yuan ticks up after faster-than-expected CPI rise, firmer fix
SHANGHAI, Aug 9 (Reuters) -China's yuan advanced slightly against the U.S. dollar on Friday, after data showed the country's consumer prices rose at a faster-than-expected rate in July, while the official fixing was also set firmer.
The spot yuan CNY=CFXS opened at 7.1770 per dollar and was last trading 65 pips firmer than the previous late session close and 0.33% weaker than the midpoint.
China's consumer price index(CPI) edged up 0.5% from a year earlier in July, versus a 0.2% rise in June, the National Bureau of Statistics (NBS) reported on Friday, beating a 0.3% increase in a Reuters poll of economists.
"Conditions are in place to see inflation trend a little higher in the coming months but it should not impede further monetary easing," said Lynn Song, chief economist of Greater China at ING.
The yuan is up 0.7% against the dollar this month, in tandem with a surging Japanese yen, as an unwinding of short positions snowballed following a surprise rate hike by the Bank of Japan and weakness in U.S. economic indicators.
However, the Chinese currency is still 0.9% weaker this year. It has been under pressure since early 2023 as domestic woes around a moribund property sector, anaemic consumption and falling yields drive capital flows out of yuan, and foreign investors stay away from its struggling stock market.
Prior to the market opening, the People's Bank of China set the midpoint rate CNY=PBOC, around which the yuan is allowed to trade in a 2% band, at 7.1449 per dollar, 241 pips firmer than a Reuters' estimate.
Friday's fixing was 11 pips stronger than the previous session despite a broader dollar rebound.
"The 'two steps forward, one step backward' CNY fixing pattern still sent a clear signal of aligning the CNY spot with CNY fixing," said Ken Cheung, director of FX strategy at Mizuho Securities Asia.
The dollar hovered close to a one-week high against major rivals on Friday, after the biggest drop in U.S. jobless claims in close to a year allayed fears of a looming economic downturn.
That prompted a paring back in bets for Federal Reserve interest rate cuts this year.
The claims data was closely monitored after a weaker-than-expected July jobs report last Friday sparked Monday's global financial market rout.
"In couple with looming Fed's rate cuts, the PBOC may be inclined to add more monetary easing to support growth and the continuing (wide) USD-CNY interest rate gap will keep a lid on the CNY rebound," said Mizuho's Cheung.
Moreover, Chinese exporters want to hold onto their dollars rather than convert them into yuan, despite the currency's sudden sharp gains this week, bankers told Reuters.
Rampant dollar hoarding by exporters has been one big factor behind the yuan's depreciation, and is widely watched by markets.
The offshore yuan traded at 7.1683 yuan per dollar CNH=, up about 0.25% in Asian trade.
The dollar's six-currency index =USD was 0.097% lower at 103.18.
Key onshore vs offshore levels:
Overnight dollar/yuan swap onshore -23.30 pips vs. offshore -23.30
Three-month SHIBOR SHIBOR= 1.8 % vs. 3-month CNH HIBOR 2.1 %
LEVELS AT 03:33 GMT GMT
INSTRUMENT | CURRENT vs USD | UP/DOWN(-) VS. PREVIOUS CLOSE % | % CHANGE YR-TO-DATE | DAY'S HIGH | DAY'S LOW |
Spot yuan <CNY=CFXS | 7.1688 | 0.12 | -0.93 | 7.1671 | 7.1798 |
Offshore yuan spot CNH=D3 | 7.1655 | 0.25 | -0.59 | 7.1655 | 7.1895 |
Reporting by Shanghai Newsroom
Editing by Shri Navaratnam
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