Yuan loses ground against the dollar after US Treasury Secretary offers support for greenback

PUBLISHED : Tuesday, 18 April, 2017, 1:01pm
UPDATED : Tuesday, 18 April, 2017, 1:01pm

The onshore Chinese yuan weakened against the US dollar Tuesday morning in Shanghai, following five days of gains, as the greenback rebounded on the back of US Treasury Secretary Mnuchin’s supportive comments.

In the spot market, the US dollar was buying 6.8903 yuan, up 0.15 per cent from 6.8803 yuan late Monday.

In the offshore market in Hong Kong, the greenback rose 0.11 per cent to 6.886 yuan, after a 0.1 per cent drop in the previous session.

Earlier in the day, the People’s Bank of China set the yuan’s mid-point rate at 6.8849 per US dollar, weaker by 64 basis points from Monday’s fix.

Against the Japanese yen, the US dollar also firmed, rising 0.05 per cent to ¥108.96.

Stephen Innes, a senior trader at Oanda Asia Pacific said “weak dollar shorts were pared after comments from US Treasury Secretary Mnuchin indicated that US tax reform is still scheduled for 2017”.

Mnuchin also said the strength of the dollar “is a good thing” over long periods of time, the Financial Times quoted him as saying in a report on Monday.

Looking ahead, analysts expect the yuan to appreciate against the US dollar.

“Last Friday, the US treasury said China is not a currency manipulator, easing the likelihood of a trade war,” said Larry Hu, an analyst for Macquarie Research.

That said, the yuan has been “very boring” so far this year, range-bounding between 6.8 and 6.9, he added.

Hu expects the yuan to appreciate against the greenback later this year.

In other foreign exchange trading, the euro and the British pound both strengthened against the US currency, rising 0.08 per cent and 0.02 per cent respectively to US$1.0652 and US$1.2568.

The ICE US Dollar Index, which measures the US currency’s strength against a basket of rivals, headed down 0.02 per cent to 100.27.