Yuan gains ground on greenback after economic data shows China economy on recovery track

PUBLISHED : Tuesday, 05 April, 2016, 1:48pm
UPDATED : Tuesday, 05 April, 2016, 1:48pm

The Chinese yuan strengthened against the US dollar in onshore trade in Shanghai on Tuesday, lifted by indications the economy is beginning to improve.

The onshore yuan in Shanghai was traded at 6.4686 per dollar as at 11.10 am, 0.14 per cent or 90 basis points stronger from its previous close.

In Hong Kong, the offshore yuan stood at 6.4752 against the greenback, 0.06 per cent or 36 basis points weaker.

The Peoples’ Bank of China set the yuan mid price at 6.4663 against the US dollar on Tuesday, 78 basis points or 0.12 per cent weaker from April 1.

“The Chinese yuan is forecasted to keep stable in short term after China’s manufacturing PMI unexpectedly jumping to 50.2 in March,” said Linus Yip, chief strategist at First Shanghai Securities.

Last week the overnight inter-bank offering rate of yuan in Hong Kong turned negative for the first time, reflecting a sharp drop in overnight offshore yuan demand

The situation is unlikely to persist, ANZ Research said in a report, expecting the yuan to weaken gradually.

Both yuan and yen may resume declines as further easing in China and Japan is likely to push the currencies to their weakest levels since at least 2008, Kamakshya Trivedi, a strategist at Goldman Sachs said in an interview with Bloomberg TV.. He said it’s time to sell Asian currencies after their best monthly rally in more than seven years.