Yuan, pound fall slightly after Comey statement
The People’s Bank of China set the yuan’s reference weaker by 0.1 per cent, ending a six-day streak of stronger adjustments
The yuan and pound sterling had weakened slightly by Thursday midday after the release of the former FBI director’s opening statement to Congress relieved some pressure on the US dollar.
The People’s Bank of China set the yuan’s reference against the US dollar at 6.7930 on Thursday morning, 0.1 per cent or 72 basis points weaker than Wednesday, ending a six-day streak of stronger adjustments.
Jasper Lo Cho-yan, chief strategist at King International, believes the central bank has been more cautious because the US dollar is under less pressure after former FBI chief James Comey’s written testimony to a congressional panel did not reveal any ground-shaking evidence against President Donald Trump’s administration.
“The adjustment made in the daily yuan reference does not indicate that it will be away from the direction of appreciation in the long run. Chinese foreign reserves were also reported to be strong earlier this year, so worries led by short-term fluctuations have eased,” Lo said.
Onshore yuan, which is mainly traded in Shanghai, was at 6.7956 yuan per dollar in early trade on Thursday, more or less unchanged from Wednesday.
Offshore yuan, which is traded in Hong Kong, was down 0.03 per cent at 6.7722 at Thursday noon.
The euro traded virtually flat while sterling fell 0.04 per cent ahead of the British general election and a European Central Bank meeting likely to focus on the euro zone inflation forecast.
The euro was trading at US$1.1258 per US dollar while the British pound softened to US$1.2956.
“As the British election draws near, the polls seem to point to a majority win by the Conservative party and shrugged off the possibility of a change of governing party. The pound has therefore not fallen as much as was previously expected,” Lo said.
“But previous British elections also did not see a great impact on the pound until the results came out, so further plunges should not be overlooked.”
Lo said the pound would come under more pressure later in the day if the US dollar stood steady, even after Comey’s testimony.
Japanese yen rebounded from an overnight fall on Thursday morning, but dropped 0.12 per cent to trade at 109.69 yen per US dollar as of midday.
The Hong Kong dollar traded close to 7.7968 against the greenback. Lo said the local currency is close to the level of 7.8, which would prompt local banks to consider raising interest rates. This could have an impact on the property market.
Gold prices had slipped 0.42 per cent as of 1pm Thursday to US$1287.8, after the rebound of the US dollar. This was a drop from the highest price in seven months recorded on Wednesday.