Views Article – Sharenet Wealth

Asia, Forex

Yuan climbs as China’s PMI raises hope of economic rebound

HONG KONG, June 30 (Reuters) – The yuan strengthened on Tuesday after China reported better-than-expected factory activity, suggesting the world’s second- largest economy may be recovering faster than thought. The onshore yuan firmed 0.18% to 7.0681 per dollar while its offshore counterpart gained 0.17% to 7.0648 after China’s official manufacturing Purchasing Manager’s Index (PMI) beat estimates and expanded in June. “Notable improvement was seen in sub-indices of production, new orders, and prices. We remain positive on the RMB in the short term…,” Citi’s analysts said in a note, referring to the yuan’s other name. The stronger PMI was underpinned by the quickening pace of expansion in production and, while export orders further contracted, it fell at a slower pace than in May. However, efforts to promote exports may tame yuan strength, Thomas Poullaouec, head of multi-asset solutions, Asia Pacific, at T Rowe Price, told a media call on Tuesday. “For us, on the RMB, there will be a slight bias towards appreciation, but not a major one in order (for Chinese policymakers) to maintain competitiveness for exports,” he said. A Shanghai-based trader said the market was watching for further U.S. reaction after Beijing passed a new national security legislation on Hong Kong, which comes as the two sides butt heads over trade, human rights and security issues. Washington, which claims the law erodes autonomy in the territory, began eliminating Hong Kong’s special trade status under U.S. law on Monday, halting defence exports and restricting the territory’s access to high technology products. The People’s Bank of China set the midpoint rate at 7.0795 per dollar prior to market open, close to the Reuters estimate of 7.0811. The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, firmed slightly to 92.06. The global dollar index rose 0.07% to 97.493. The yuan market at 0406 GMT: ONSHORE SPOT: Item Current Previous Change PBOC midpoint 7.0795 7.0808 0.02% Spot yuan 7.0681 7.08 0.17% Divergence from -0.16% midpoint* Spot change YTD -1.48% Spot change since 2005 17.10% revaluation Key indexes: Item Current Previous Change Thomson 92.06 91.88 0.2 Reuters/HKEX CNH index Dollar index 97.493 97.424 0.1 *Divergence of the dollar/yuan exchange rate. Negative number indicates that spot yuan is trading stronger than the midpoint. The People’s Bank of China (PBOC) allows the exchange rate to rise or fall 2% from official midpoint rate it sets each morning. OFFSHORE CNH MARKET Instrument Current Difference from onshore Offshore spot yuan 7.0648 0.05% * Offshore 7.1777 -1.37% non-deliverable forwards ** *Premium for offshore spot over onshore **Figure reflects difference from PBOC’s official midpoint, since non-deliverable forwards are settled against the midpoint. . (Reporting by Noah Sin, Additional reporting by Rong Ma in Beijing; Editing by Jacqueline Wong)

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