Chinese Yuan Slips, Market Focuses on Fed, PBOC Next Week

SHANGHAI, March 11 (Reuters) – The Chinese yuan slid against the dollar on Friday and looked set to post a second consecutive weekly loss, after a report on U.S. inflation cemented expectations for a rate hike from the Federal Reserve this month and for the rest of the year. year.

Some traders and analysts said market sentiment was also hurt after U.S.-listed Chinese stocks tumbled overnight after the first Chinese companies were named as potentially delisted, noting the move increased risks of exits from the stock market. capital. Read more

The Hang Seng Tech index (.HSTECH) plunged more than 7%, while China’s onshore CSI300 index (.CSI300) fell more than 2% in morning trading.

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Ahead of the market open, the People’s Bank of China (PBOC) pegged the midpoint rate at 6.3306 per dollar, 201 pips or 0.32% lower than the previous patch of 6.3105.

In the spot market, the onshore yuan opened at 6.3260 per dollar and was changing hands at 6.3249 by midday, 31 pips lower than the previous late session close.

Traders said the Chinese currency’s weakness reflected broad dollar strength after data on Thursday showed US consumer prices jumped 7.9% year-on-year in February, the largest annual increase in 40 years.

A trader at a Chinese bank said US inflation data should reaffirm the view that the Fed will make the first interest rate hike since the pandemic at its policy meeting next week – and the The focus is on whether the US central bank is becoming even more hawkish given the surge in global prices.

“Under the threat of high inflation, markets will be very keen on whether the Fed’s stance would be more hawkish,” economists at OCBC Wing Hang Bank said in a note.

The monetary policy stance of the PBOC is also on the radar.

China’s central bank is set to refinance a 100 billion yuan ($15.81 billion) batch of strategic loans next week. Citing analysts, state-owned Shanghai Securities News flagged the chances of a cut in the cost of borrowing – a move that contrasts sharply with the hawkish monetary policy of most major global central banks and could add to the pressure for sale on the yuan.

Separately, China doubled the daily floating range of the yuan against the Russian ruble in the interbank market to 10% from 5% from Friday.

Guan Tao, chief global economist at BOC International and a former senior foreign exchange regulator, said the decision to widen the yuan/ruble trading band could “better reflect changes in international currency markets”.

By noon, the World Dollar Index (.DXY) fell to 98.505 from the previous close of 98.507, while the offshore yuan traded at 6.3325 to the dollar.

The yuan market at 04:00 GMT:


Key indexes:

*Divergence of the dollar/yuan exchange rate. A negative number indicates that the spot yuan is trading stronger than the midpoint. The People’s Bank of China (PBOC) allows the exchange rate to rise or fall by 2% from the official midpoint rate it sets each morning.


*Premium for offshore spot on onshore

**The figure reflects the difference from the official PBOC midpoint, as non-deliverable futures are settled relative to the midpoint. .

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Reporting by Winni Zhou and Andrew Galbraith Editing by Shri Navaratnam

Our standards: The Thomson Reuters Trust Principles.

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