Yuan firms in Hong Kong and Shanghai after PBOC guides currency higher

Depreciation pressure on the yuan has eased in the wake of dovish comments by US Fed officials earlier this week

PUBLISHED : Wednesday, 08 June, 2016, 12:03pm
UPDATED : Monday, 27 June, 2016, 11:51am

The Chinese yuan strengthened on Wednesday morning against the US dollar in both Hong Kong and Shanghai, after the Chinese central bank guided the currency higher.

The People’s Bank of China (PBOC) on Wednesday set the midpoint of the yuan’s trading band against the US dollar at 6.5593, stronger by 0.04 per cent or 25 pips from the previous fixing. On Tuesday, the PBOC guided the currency weaker by 121 pips.

The Chinese central bank allows the onshore yuan rate to swing by a maximum of 2 per cent in each direction against the official fixing rate.

Onshore yuan firmed in Shanghai, trading at 6.5682 against the US dollar as of 10.20am, stronger by 0.04 per cent or 28 pips from the previous close.

Offshore yuan in Hong Kong also rose versus the greenback, firming by 0.05 per cent or 32 pips from Tuesday’s close.

Analysts said near-term pressure on the yuan has eased, as expectations have weakened for a strong US dollar after the prospects of a June rate hike by the Fed diminished significantly.

“Anticipation of increasing cross-border flows after the Shenzhen Connect announcement in coming weeks, along with the MSCI decision on A-share inclusion due by June 15, should provide additional support for the yuan,” said Stephen Innes, senior trader at OANDA Asia Pacific.

Still, there has been “keen interest to buy USD/CNH (offshore yuan) on dips” despite broader-based weakness in the greenback, as an earlier-than-expected Fed rate hike can’t ruled out, he added.