China's yuan little changed against the US dollar as Fed official signals dovish policy rate rise pace
The yuan traded basically flat against the US dollar on Tuesday as traders assessed dovish comments from a senior US Federal Reserve official, who indicated the US central bank won’t raise interest rates at an accelerated pace this year.
The dollar has been under pressure against global currencies since last week, when the Fed disappointed some investors by signalling no pick-up in the pace of interest rate rises.
The offshore yuan in Hong Kong was down 0.09 per cent, or 59 basis points, to 6.8948 against the greenback at 12.40pm, while the onshore yuan in Shanghai traded up 0.04 per cent, or 29 points, at 6.9056.
The People’s Bank of China on Tuesday set the yuan daily fixing against the US dollar weaker for a fourth day.
The midpoint rate was set at 6.9071, compared to its previous fix 6.8998, or 73 basis points weaker than Monday.
The onshore exchange rate is allowed to fluctuate up to 2 per cent either side of the reference point daily.
Chicago Fed President Charles Evans, speaking on Fox Business Network TV on Monday, said the Fed was likely to lift interest twice more this year, but could be modify its approach to the policy rate depending on inflation.
Jasper Lo, chief strategist of King International Futures, said the yuan will likely stay weak as global traders become more positive towards the greenback.
“The US dollar is gradually bottoming out,” Lo said. “The market is again betting on an increase in the number of interest rate rises this year.”
Lo said the yuan may also suffer from growing protectionist worries after G20 officials dropped a decade-old pledge to keep trade open in their post-meeting communiques on Saturday.
The global dollar index dropped to 100.28 from the previous close of 100.41.
Sterling rebounded to US$1.2360 after it weakened on news that the British government will officially begin the process to leave the European Union on March 29.
The euro strengthened 0.16 per cent to 1.0756 per US dollar, while the yen was 0.12 per cent stronger with the US dollar buying 112.68.
The market is also awaiting speeches by US Fed officials this week for their projections on the future movement of the dollar. Fed Chair Janet Yellen will speak at a community development conference on Thursday.