Views Article – Sharenet Wealth

Asia, Forex

Yuan advances to 2-week high as China shares rally

SHANGHAI, July 6 (Reuters) – The yuan advanced to a near two-week high against the dollar on Monday morning, as a spurt in China’s stock market on the back of economic recovery optimism underpinned sentiment. A state-run media commentary published over the weekend said the A-share market had the basis and key elements for a bull market. It cited sound economic fundamentals, capital market reforms and continued fund inflows into Chinese shares. The blue-chip CSI 300 index and the benchmark Shanghai Composite jumped more than 4% on Monday morning, extending the previous week’s rallies. Prior to market opening, the People’s Bank of China (PBOC) set the midpoint rate at 7.0663 per dollar, 25 pips or 0.04% weaker than the previous fix of 7.0638. In the spot market, onshore yuan opened at 7.0633 per dollar and rose to a high of 7.0525 at one point, the strongest since June 24. As of midday, spot yuan was changing hands at 7.0534, 136 pips firmer than the previous late session close. Several traders said sharp gains in the A-share market had driven the yuan higher and expected the currency to break the recent 7.05 to 7.1 range on the topside and edge firmer. “The stellar performance of the A-share market pulled Hong Kong equities higher and lifted the CNH and CNY spot to mid-7.05 level,” Ken Cheung, chief Asian FX strategist at Mizuho Bank in Hong Kong, said in a note. “It is reminiscent of the reckless A-share market rally in 2015, when the Shanghai Composite surged from around 3,000 to a high of 5,178 in four months before falling back to near 3,000 in two months.” A trader at a Chinese bank said whether gains in the yuan would be sustainable depended on the stock market’s performance. In global markets, the dollar held steady against most currencies as investors awaited data expected to show the U.S. services sector stopped contracting. Offshore yuan was trading at 7.054 per dollar. The yuan market at 0402 GMT: ONSHORE SPOT: Item Current Previous Change PBOC midpoint 7.0663 7.0638 -0.04% Spot yuan 7.0534 7.067 0.19% Divergence from -0.18% midpoint* Spot change YTD -1.28% Spot change since 2005 17.34% revaluation Key indexes: Item Current Previous Change Thomson 92.06 91.98 0.1 Reuters/HKEX CNH index Dollar index 96.951 97.175 -0.2 *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 7.054 -0.01% * Offshore 7.1776 -1.55% 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 Winni Zhou and Andrew Galbraith; Editing by Jacqueline Wong)

© 2019 Thomson Reuters. All rights reserved. Reuters content is the intellectual property of Thomson Reuters or its third party content providers. Any copying, republication or redistribution of Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters. Thomson Reuters shall not be liable for any errors or delays in content, or for any actions taken in reliance thereon. "Reuters" and the Reuters Logo are trademarks of Thomson Reuters and its affiliated companies.