China’s yuan slightly weaker as traders await comments from Fed officials
The Chinese yuan traded flat against the US dollar on Monday morning after increased borrowing costs in China eased depreciation concerns.
Yuan traders are also awaiting speeches by US Federal Reserve officials this week for their projections on the future movement of the dollar.
The offshore yuan in Hong Kong was 0.06 per cent, or 40 basis points, weaker against the greenback at 6.8773 as of 10.40am, and the onshore yuan in Shanghai traded 0.01 per cent, or 10 points, weaker at 6.9044.
The Fed raised interest rates on Wednesday, and the Chinese central bank increased the borrowing costs it charges commercial lenders one day after.
“I think they are trying to better align the interest rates in China with those in the US to curb capital outflows,” said Stephen Innes, senior trader at OANDA.
“It seems to be working. There is not a lot of panicking in the market on the yuan’s side.”
The People’s Bank of China set the daily reference point against the US dollar at 6.8998, 125 basis points weaker than Friday. The onshore exchange rate is allowed to move up to 2 per cent either side of the reference point daily.
In a statement published online on Saturday, PBOC governor Zhou Xiaochuan said China would maintain “stable and neutral” monetary policies.
He said the country’s financial system was healthy in general, with risks coming from high leverage, debt and property markets as well as shadow banks.
The global dollar index dropped to 100.18 from the previous close of 100.30.
The British pound traded 0.03 per cent weaker at 1.2392 against the dollar, while the euro strengthened 0.20 per cent to 1.0760 per US dollar.
The yen was 0.15 per cent stronger at 112.53.