Yuan tracks slightly higher after PBOC sets the daily reference rate stronger against the dollar

Chinese currency likely to trade mostly stable in final weeks of the year, one analyst says

PUBLISHED : Tuesday, 06 December, 2016, 11:34am
UPDATED : Tuesday, 06 December, 2016, 11:34am

The Chinese yuan was slightly higher on Tuesday after the People’s Bank of China set the reference rate stronger against the US dollar.

Onshore yuan in Shanghai traded at 6.8648 to the US dollar at 10.10am, 0.24 per cent stronger than the 6.8815 seen at Monday’s close.

Offshore yuan in Hong Kong traded at 6.8685 to the US dollar at 10.1 am, slightly weaker but almost unchanged from Monday’s close of 6.8656.

The People’s Bank of China on Monday set the yuan reference point against the US dollar at 6.8575, stronger than on Tuesday when the reference point was set at 6.8870.

Traders are allowed to trade up to 2 per cent either side of the reference point for the day.

Last month, offshore yuan hit record lows, while onshore yuan traded at lows not seen since June 2008.

Stephen Innes, Asia-Pacific senior currency trader and analyst at Oanda, said he wasn’t expecting big movements in the yuan as the market headed into year-end.

Traders had forecast that the yuan would be finishing the year around the 6.9 levels against the US dollar, and would reach the 7 mark next year, while the 7.6 mark was still quite a way out, he said.

Innes expects gains in the US dollar to continue early next year.

Meanwhile the euro rallied on Monday, rising 0.9 per cent, after trading at a 20-month low against the dollar into the start of the trading week.

Italian Prime Minister Matteo Renzi’s resigned following the defeat of his constitutional reform referendum, while Austria opted for Green Party-backed Alexander Van der Bellen as its new president over a far-right candidate.

The New Zealand dollar, among the 10 most traded currencies in the world, slipped against the greenback after long-time Prime Minister John Key resigned on Monday, but by Tuesday had recovered all its losses to trade at 0.7148 to the US dollar.