Currencies flat ahead of key speech by US Fed chair

Quiet trading, as markets wait to hear from Yellen on US interest rates

PUBLISHED : Thursday, 25 August, 2016, 12:40pm
UPDATED : Thursday, 25 August, 2016, 12:40pm

The Chinese yuan and other major currencies traded within a narrow range on Thursday morning, with markets generally holding back for any hints of possible US interest rate movements from US Federal Reserve chairwoman Janet Yellen on Friday.

Onshore yuan traded in Shanghai edged down 0.06 per cent in early trade to 6.6605 per US dollar, after it fell 0.26 per cent on Wednesday. It bounced back to 6.6572 by 11am, almost unchanged from Wednesday close.

Offshore yuan in Hong Kong was down 0.03 per cent in early trade to 6.6730, before bouncing back to 6.6683 by 11am. The currency dropped 0.21 per cent on Wednesday.

Both onshore and offshore yuan both fell sharply along with other Asian currencies on Wednesday due to the escalating geopolitical tensions created by a North Korean missile launch into the Sea of Japan, which Japanese prime minister called “unforgivable conduct.”

Jasper Lo, chief executive of King International, said the market had turned quiet on Thursday as traders awaited a speech by Yellen to the Jackson Hole Symposium, at 11am US time (about 10pm HK time) on Friday.

Recent US economic statistics have not been good, meaning the interest rate rise may not come as soon as September
Jasper Lo, chief executive of King International

“We all expect Yellen to give some indication of whether the Fed will increase interest rates at its next meeting in September. Some traders expect a rate rise, so the US dollar has been trading stronger against the yuan and other currencies,” Lo said, adding he personally did not expect any rise until December.

“Recent US economic statistics have not been good, meaning the interest rate rise may not come as soon as September.

“The Fed might not want to raise them before November, and the US Presidential election. I believe a rate rise in December to be more realistic,” he said.

The People’s Bank of China on Thursday set the yuan reference point against the US dollar at 6.6602, 182 basis points or 0.27 per cent weaker than Wednesday. Traders are allowed to trade up to 2 per cent either side of the reference point for the day.

The greenback traded slightly up against other major currencies on Thursday morning.

One dollar was worth 100.41 yen at 11am, up 0.02 per cent. A pound bought US$1.3222, down 0.08 per cent. While the euro traded at US$1.1269, stronger by 0.07 per cent, ending the previous four-day falling streak of a combined 0.5 per cent.

The Hong Kong dollar remained on the strong side of the peg, and was trading at 7.7539 to the greenback, just shy away from this year’s high of 7.7503 on January 4.