China’s yuan weakens despite PBOC raises fix for fourth day

The yuan’s mid-point rate at 6.8456 against the US dollar, up 173 basis points or 0.25 per cent

PUBLISHED : Friday, 17 February, 2017, 12:08pm
UPDATED : Friday, 17 February, 2017, 12:08pm

The Chinese yuan weakened Friday morning, despite that the Chinese central bank strengthened the yuan’s reference rate for a fourth straight day.

The onshore yuan in Shanghai traded down 0.16 per cent or 113 points at 6.8631 as of 10.50 am.

The offshore rate in Hong Kong traded edged lower by 0.03 per cent or 19 points to 6.8506.

Earlier in the day, the People’s Bank of China raised the yuan’s mid-point rate to 6.8456 against the US dollar, up 173 basis points or 0.25 per cent.

It was the fourth day for the Chinese central bank to strengthen the currency’s fixing. Traders are allowed to trade up to 2 per cent either side of the reference point for the day.

“The Chinese yuan market is reticent, without much going through,” said Stephen Innes, senior trader at Oanda.

However, investors who hold upbeat outlook for the yuan may be concerned about the US dollar’s strength after Yellen’s hawkish remarks, he added.

Earlier this week, Federal Reserve Chair Janet Yellen said in a congressional testimony that it would be “unwise” to wait too long to raise interest rates as the US economic growth continues and inflation rises, although uncertainty still surrounds Trump’s economic policy.

On Friday morning, the DXY US dollar Index was up 0.07 per cent to 100.51.

In other currency markets, the British pound traded up 0.1 per cent to 1.2498 per US dollar. However, the euro was down 0.01 per cent to 1.0670 per US dollar after hitting 1.0680 in the previous session, the highest this week.

The Japanese yen strengthened 0.21 per cent against the greenback to ¥113.45.

In a separate event, Hong Kong Exchanges and Clearing (HKEX) announced Thursday evening on its website that the trading of yuan options contracts will begin on March 20 this year. The US dollar-offshore yuan (CNH) options will be the first currency options traded at HKEX. It will complement the exchange’s US dollar offshore yuan futures trading.

On the start date, the contract months for the USD/CNH options contracts available for trading are April 2017, May 2017, June 2017, July 2017, September 2017, December 2017, March 2018 and June 2018, the announcement said.