Yuan retreats from 1-month high after weaker fix
Dollar recoups some of previous losses against major currency peers
The onshore Chinese yuan pulled back Tuesday morning against the US dollar, after closing at a one-month high in the prior session, as the People’s Bank of China guided the currency lower.
Spot yuan traded at 6.8833 per US dollar at 11.30am, down 0.2 per cent from late night trade on Monday. It was also weaker than the previous afternoon’s close of 6.8764, which was the highest closing level in almost a month.
The offshore yuan also slid 0.1 per cent to 6.8637 on Tuesday morning, compared with 6.8554 late the previous day.
Earlier, the People’s Bank of China cut the yuan’s mid-point rate to 6.8782 per US dollar. On Monday, the PBOC raised the yuan’s fixing rate to 6.8701, the highest in more than a month.
On Tuesday morning, the greenback recouped some of its recent losses. The ICE US Dollar Index, a gauge of the US currency against six rivals, rebounded 0.1 per cent to 99.221 after touching a four-month low overnight.
The dollar’s previous declines were triggered by the withdrawal of the American president’s health care bill by House Republicans, analysts said.
“Trump’s economic agenda is called into question following his inability to replace the national health care legislation,” said Marc Chandler, global head of currency strategy for Brown Brothers Harriman.
Although there is some hope among investors that the next priority, tax reform, will be more successful, Chandler remained doubtful.
“On political grounds, the inclusion of the border adjustment tax, which is the major source of funding for the anticipated tax cuts, remains highly controversial,” he said.
“In fact, the same Republican group that sank the Trump/Ryan alternative, the Freedom Caucus, is opposed to the border adjustment tax.”
In the week ahead, he said currency traders will closely watch comments by a number of Fed speakers and US economic data for clues about the dollar’s direction. The data will include revised fourth-quarter gross domestic product numbers on Thursday and consumer spending figures on Friday.
Against the Japanese yen, the US dollar continued to weaken, down 0.1 per cent to ¥110.61.
The British pound strengthened to 1.2569 per US dollar from 1.2559 late on Monday. The euro traded at 1.0863 per dollar versus 1.0864 late on Monday.