Currencies enjoy a moment of calm as markets await details of FOMC’s September minutes

Pound ends falling streak, rising 1.33pc to US$1.2277; Yuan reference point 0.2 pc weaker, at 6.7258 to the greenback

PUBLISHED : Wednesday, 12 October, 2016, 11:14am
UPDATED : Wednesday, 12 October, 2016, 11:14am

The Chinese yuan, along with other major currencies, appeared to find some breathing space on Wednesday against an ever-strengthening US dollar, as investors waited to see the minutes from September’s Federal Open Market Committee (FOMC) meeting, which should reveal the Fed’s overall stance on US interest rates.

The onshore yuan in Shanghai dipped 0.02 per cent or 11 points to 6.7201 against the US dollar at 10am, while the offshore yuan in Hong Kong strengthened, up 0.08 per cent or 55 points to 6.7236 per dollar.

The People’s Bank of China on Wednesday continued to set the yuan reference point weaker, at 6.7258 against the US dollar, down 160 basis points or 0.2 per cent than on Tuesday. It marks the seventh trading day the central bank weakened the yuan fixing, leading it to a new six-year low.

In other currencies, the Japanese yen inched 0.01 per cent lower to 103.51 against the US dollar, but the pound ended its falling streak for a moment, rising 1.33 per cent or 161 points to US$1.2277 a pound. The uuro weakened, down 0.04 per cent to US$1.1047.

The DXY(USD) Index, which measures the strength of the greenback against other currencies, ended at 97.69 on Tuesday, its highest level since early March.

“The rise was in line with higher bond yields on interest rate rise expectations,” DBS said in a research note.

Analysts said the strong US dollar was also supported by a rising chance that Hilary Clinton would win the president election after the second TV debate with rival Donald Trump this week, as well as weakening sterling amid renewed worries over a hard Brexit, after it slumped 6.1 per cent last Friday.

“US dollar bulls are hoping for tonight’s FOMC minutes for the September meeting to show the hawks leading the doves,” DBS said.