Yuan strengthens for a second day despite weaker PBOC fixing

PUBLISHED : Friday, 21 April, 2017, 1:37pm
UPDATED : Friday, 21 April, 2017, 1:59pm

The yuan strengthened against the US dollar for a second day on Friday.

In the spot market in Shanghai, the US dollar bought 6.88 yuan at 2pm, down 0.03 per cent from 6.8822 late Thursday.

In Hong Kong, the offshore yuan also rose, as the dollar traded at 6.8801 yuan compared with 6.8845 in the prior session.

Earlier in the day, the People’s Bank of China set the yuan’s mid-point rate at 6.8823 per US dollar, down 31 basis points from the previous day. It marked a second day for the PBOC to weaken the fixing rate.

Capital outflow conditions have stabilised in China.

Chinese banks sold a net 48.3 billion yuan (US$7 billion) in spot foreign exchange settlements in March, the lowest level since mid-August, according to recent government statistics.

“Following the stabilisation of foreign exchange (FX) reserves and RMB exchange rate, the decline in net FX settlement deficit was not surprising, but confirmed easing capital outflow pressure,” said Ken Cheung Kin Tai, Asian forex strategist at Mizuho Bank.

“If China started to relax its capital outflow controls, we look for further cross-border RMB flows to offshore market, which were being suppressed since the fourth quarter 2016.”

He expected the offshore yuan to face downward pressure as offshore liquidity conditions continue to improve.

In afternoon trade, the euro firmed slightly against the greenback, up 0.01 per cent to US$1.0718, ahead of the first round of the French elections on Sunday.

The British pound dropped 0.1 per cent to US$1.2812.

Against the Japanese yen, the US currency weakened to ¥109.22 from ¥109.32 late Thursday.