Views Article – Sharenet Wealth

Asia, Forex

Yuan briefly hits 5-mth high but pares gains as Sino-U.S trade meeting looms

SHANGHAI, Aug 13 (Reuters) – The yuan briefly hit a five-month high against the U.S. dollar on Thursday before giving back all the day’s gains on nervousness ahead of Sino-U.S. trade discussions later this week. Top officials from both sides will hold a videoconference on Saturday to review their Phase 1 trade deal signed in January. Despite rising tensions between Washington and Beijing over Hong Kong and other issues, traders said comments by top White House economic adviser Larry Kudlow were supporting market sentiment. Kudlow told reporters on Tuesday that the trade deal was in “fine” shape and China was continuing to buy U.S. goods, particularly commodities. Prior to the market opening, the People’s Bank of China (PBOC) set the midpoint rate at 6.9429 per dollar, 168 pips or 0.24% firmer than the previous fix of 6.9597. In the spot market, the onshore yuan opened at 6.9312 per dollar and rose to a high of 6.9301 at one point, the strongest level since March 9. But by midday, it was changing hands at 6.9411, 28 pips weaker than the previous late session close. Several traders said the currency market was unwilling to test firmer levels for the time being amid huge uncertainty over Sino-U.S. relations. “U.S.-China tension is the most significant short-term headwind (for the yuan), which may deteriorate further in the coming two to three months,” Wang Tao, chief China economist at UBS, said in a note. “The de-coupling pressure may risk China’s access to technology frontier and dampen long-term growth potential. Diversification needs of China’s domestic entities may persist, leading to continued capital outflows.” Separately, Bloomberg News reported on Wednesday, citing sources, that Chinese trade negotiators also were likely to bring up issues surrounding TikTok and WeChat. Last week, U.S. President Donald Trump unveiled bans on U.S. transactions with the China-based owners of messaging app WeChat and video-sharing app TikTok. The global dollar index fell to 93.264 at midday from the previous close of 93.364. The offshore yuan was trading at 6.9393 per dollar as of midday. China will release a raft of data on Friday that is expected to show its economic recovery is building momentum, with industrial output and investment picking up speed and consumer spending possibly rising for the first time this year. The yuan market at 0401 GMT: ONSHORE SPOT: Item Current Previous Change PBOC midpoint 6.9429 6.9597 0.24% Spot yuan 6.9411 6.9383 -0.04% Divergence from -0.03% midpoint* Spot change YTD 0.32% Spot change since 2005 19.24% revaluation Key indexes: Item Current Previous Change Thomson 92.13 92.18 -0.1 Reuters/HKEX CNH index Dollar index 93.264 93.364 -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 6.9393 0.03% * Offshore 7.0983 -2.19% 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 Kim Coghill)

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