Chinese yuan remains flat despite stronger reference rate
China’s yuan traded slightly weaker on Tuesday morning, despite the central government strengthening the middle price.
Onshore yuan in Shanghai remained almost flat and traded at 6.6792 to the US dollar at 11.50 am, 0.01 per cent or 4 basis points weaker than on Monday. The modest drop represents onshore yuan’s fourth consecutive daily decline.
Offshore yuan in Hong Kong traded at 6.6873 to the US dollar at 11.50 am, 0.05 per cent, or 31 basis points weaker than on Monday.
The People’s Bank of China on Tuesday set the yuan reference point against the US dollar at 6.6726, 182 basis points, or 0.27 per cent, stronger than on Monday. Traders are allowed to trade up to 2 per cent either side of the reference point for the day.
CNH Hibor, the overnight Hong Kong Interbank Offered Rate for offshore yuan, rose 80 basis points to 5.5155 per cent on Monday, data from the Treasury Markets Association shows. Last Thursday, it hit the highest level in seven months, jumping from 1.57 per cent to 5.45 per cent.
Wilson Tang, an equities specialist at DBS Bank Hong Kong, said the surging Hibor is a sign that the
Chinese government has intervened in the currency market to stabilise the yuan ahead of its official inclusion in the Special Drawing Rights basket of the International Monetary Fund in October.
“For sure, the central bank will stabilise the yuan before its official inclusion in SDR, despite the increasing chance of a US rate hike putting great pressure on yuan,” added Tang.
In other currency trading, the British pound was unchanged, trading at US$1.3334 on Tuesday morning while the euro weakened 0.02 per cent to US$1.1235.