YUAN TRADING
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Currencies

Yuan jumps as PBOC raises fixing to one-month high

US dollar weakens after the legislative defeat of President Trump’s attempt to get his health care reforms past Congress

PUBLISHED : Monday, 27 March, 2017, 12:13pm
UPDATED : Monday, 27 March, 2017, 4:45pm

The Chinese yuan rose sharply on Monday, after the People’s Bank of China raised the daily fixing to the strongest level in more than a month.

Meanwhile the greenback came under heavy selling pressure as investors grew increasingly doubtful about US President Donald Trump’s ability to move his agenda through Congress.

Spot yuan advanced 0.1 per cent, or 79 basis points, to 6.8758 per US dollar as of 4.45pm. The offshore rate also rose 0.3 per cent, or 187 basis points, to 6.8542.

Earlier in the day, the People’s Bank of China set the yuan’s mid-point rate at 6.8701 per US dollar, the highest since February 24. It was the fourth straight session that the PBOC has raised the yuan’s fixing.

Domestic traders can only buy or sell the yuan within 2 per cent of the daily fixing rate.

“The economic data out of China recently points to stabilisation. Taken along with rising price pressures, we think the PBOC may move to a more hawkish stance this year,” said Marc Chandler, global head of currency strategy at Brown Brothers Harriman.

How quickly the Whitehouse administration can pivot to, and get a convincing message across, on tax reform will likely be the major focus early in the week
Stephen Innes, Oanda Pacific

The US dollar was significantly weaker against other major currencies.

The ICE US Dollar Index, a closely-watched gauge of the greenback’s strength versus six rivals, declined 0.5 per cent, or 516 basis points, to 99.111 at 4.45pm, compared with 99.627 late on Friday.

Against the Japanese yen, the American currency tumbled 1 per cent to ¥110.23.

Traders were “selling the fact of the great GOP divide”, after House Republicans pulled Trump’s health care bill on Friday when they failed to get enough support for it, analysts said.

“I suspect the markets will continue to view this failed vote as a litmus test for the ability of the Trump administration to drive the President’s agenda going forward,” said Stephen Innes, a senior currency trader at Oanda Pacific.

“How quickly the Whitehouse administration can pivot to, and get a convincing message across, on tax reform will likely be the major focus early in the week.”

The euro and sterling both jumped versus the greenback in late afternoon trade, up 0.6 per cent and 0.7 per cent respectively to 1.0866 and 1.2564 per US dollar.

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