Yuan firms against the dollar on Tuesday morning

Yuan firms on Tuesday morning as central bank sets the fixing slightly lower

PUBLISHED : Tuesday, 31 May, 2016, 12:25pm
UPDATED : Tuesday, 31 May, 2016, 12:25pm

China’s yuan currency firmed on Tuesday morning after sliding to a four month low on Monday.

The onshore yuan in Shanghai inched up 0.03 per cent, or 20 basis points, to 6.5790 to the dollar as of The offshore yuan in Hong Kong rose 0.02 per cent, or 11 points, to 6.5882 against the greenback.

The People’s Bank of China, the country’s central bank, on Tuesday set the yuan reference point against the US dollar slightly lower at 6.5790, down 6 basis points, or 0.01 per cent, compared with Monday.

The fixing point is now at its lowest in over five years.

On Monday, the central bank weakened the yuan fixing by 294 basis points to 6.5784 to the US dollar, the lowest level since February 2011 as the US dollar rallied.

The onshore yuan at one point fell to a four-month low of 6.5833 to the dollar on Monday, with the offshore yuan decreasing over 130 basis points to a three-and-a-half-month low.

William Fung, vice president at Southwest Securities, said investors are not too concerned about the depreciation of the yuan because stock prices in Hong Kong have still risen.

The US dollar may maintain its strength in the short term due to expectations of an interest rate hike by the Federal Reserve and the central bank’s hawkish, but it will not climb much further, Fung said. Fung said that US employment data for May, which will be released on Friday, is unlikely to surprise the market a lot.

Fed Chairwoman Janet Yellen on Friday said in a speech at Harvard University that it was probably appropriate to raise the interest rate in coming months.

Fung expects the yuan to stand between 6.5 and 6.6 against the US dollar in the short term.