Dealers in China’s yuan have eyes on next week’s Fed meeting
Chinese currency little changed in offshore and onshore trade on Tuesday morning, as traders wait and see whether US Fed will hint at interest rate polices at its meeting next week.
The yuan moved little in offshore and onshore trade on Tuesday morning as dealers waited for the US Federal Reserve — central bank for the world’s largest economy — to give indications over its interest rate plans.
The offshore yuan in Hong Kong was at 6.4818 to the dollar at 11.22 am, 0.02 per cent or 11 points stronger from a day earlier. The onshore yuan in Shanghai traded at 6.4717 against the dollar at the same time, 28 points, or 0.04 per cent, weaker from its Monday close. That was even with China’s central bank setting a higher reference rate.
The Peoples’ Bank of China set the yuan mid point on Tuesday at 6.4700 against the dollar, up 87 points or 0.13 per cent from a day earlier. That’s the highest since April 13.
Jasper Lo, chief executive of King International, said the yuan is likely to trade flat this week barring any unforeseen events as the market is waiting to see what the Fed will say at next week’s meeting.
“Market watchers have somewhat reached a consensus that the Fed will not raise the interest rate in May, but they expect Fed Chair Janet Yellen to give some direction on whether a rate hike will come in June,” Lo said. He added that the trading volume of the “redback” remained slim in Hong Kong.
China’s 6.7 per cent annual economic growth in the first quarter was in line with market expectations and may support the currency in near term, Lo said.
Although the yuan seems to be stable against the greenback, the CFETS RMB Index, which tracks a basket of currencies, continued to drop and fell to 97.38, an all-time low, on April 15, according to the latest data from the authority.
“That is not a surprise, as the yen jumped quite a lot recently,” Lo said. “In fact, except for the pound, some major currencies have appreciated a little against the US dollar.”
The yen traded at 109.09 to the dollar, down 0.25 per cent from a day earlier. The Japanese currency has risen 2.3 per cent so far this month.