Yuan flat as investors await Trump, Yellen speeches this week

PUBLISHED : Tuesday, 28 February, 2017, 11:46am
UPDATED : Tuesday, 28 February, 2017, 11:46am

The Chinese yuan saw little movement on Tuesday morning, as investors wait to see how the US dollar responds to President Donald Trump’s first address to Congress tonight.

The onshore yuan in Shanghai was 0.02 per cent or 12 points weaker at 6.8687 against the US dollar at 10.15am, extending its losing streak to a third straight days, while the offshore yuan in Shanghai was slightly stronger, up 0.06 per cent or 4 pips to 6.8574.

The People’s Bank of China set the currency’s reference rate at 6.8750, 64 points or 0.1 per cent stronger than on Monday as the US dollar weakened slightly ahead of Trump’s speech.

The DXY index, which tracks the US dollar against a basket of six currencies, hovered around 101. Gold futures in New York continued to edge higher amid stronger risk-aversion sentiment.

“The market is playing this week up as a Clash of the Titans [between Federal Reserve Chair Janet Yellen and Trump], but the dollar bears should take caution if Trump follows through on infrastructure and Yellen ratchets up the rate hike rhetoric to end the week,” said Stephen Innes, senior trader at OANDA.

President Trump is scheduled to unveil his budget plan for the next fiscal year tonight, while Yellen and her vice-chair Stanley Fischer will make speeches on Friday, possibly giving more clues as to the pace of interest rate rises.

The probability of a Fed rate rise in March is edging towards 50 per cent after the Dallas Fed’s Robert Kaplan repeated his view that the central bank should move “sooner rather than later”, Innes said.

In other currencies, the euro was almost flat, down 0.01 per cent or 1 point to US$1.0584. The British pound extended its losing streak to three consecutive days following a report in the Sunday Times that Scotland may call a second referendum on leaving the United Kingdom. It was 0.1 per cent weaker at US$1.2432.