Chinese Yuan Rises, Market Focuses on 2022 Outlook

SHANGHAI, Dec.21 (Reuters) – The Chinese yuan edged up against a weaker dollar on Tuesday, as investors cautiously turned to riskier assets after Omicron fears fell sharply, although attention shifted to riskier assets. be focused on whether the currency could maintain its strength next year. Read more

Before the market opened, the People’s Bank of China (PBOC) pegged the median rate at 6.3729 per dollar, 204 pips or 0.32% firmer than the previous patch of 6.3933.

In the spot market, the onshore Yuan opened at 6.3750 to the dollar and changed hands at 6.3744 by noon, 14 pips higher than the previous session’s close.

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Traders said the spot yuan benefited from a slight decline in the dollar overnight, although pervasive concerns over the rapid spread of the Omicron coronavirus variant to other countries have kept demand for value intact. refuge, capping the losses of the greenback.

They added that the yuan trade was largely lukewarm this week as many market participants went on year-end vacation.

“The yuan followed the movements of the dollar as the holidays approach,” said a trader at a Chinese bank.

The Chinese yuan is on track for its second consecutive year of gains to become the top performing emerging market major currency.

However, its trade has been less tied to the outlook for the dollar in recent months, which has sparked debate over the sustainability of the yuan’s rally.

Traders and analysts said a stronger dollar, a slowing domestic economy, monetary easing, and political differences with other major economies could all put downward pressure on the yuan.

Ming Ming, head of fixed income research at CITIC Securities, said rising expectations that the Federal Reserve would raise interest rates next year would bolster the dollar.

This is likely to happen as demand from domestic companies for the yuan conversion weakens after the Lunar New Year holiday.

“Chinese export growth is expected to decline in the second half of next year, currency regulations and demand will balance out, and the dollar may once again dominate the yuan’s movements,” he said in a note. .

Guan Tao, a former head of the currency regulator, also warned that China should prepare for its currency to move further away from recent highs if economic data continues to disappoint next year. Read more

But Eugenia Fabon Victorino, head of Asia strategy at SEB, said the lack of outbound tourism is expected to dampen capital outflows, providing some support to the yuan.

“China will likely maintain its strict border controls until the end of 2022, keeping the services deficit to a minimum,” she said, expecting the yuan to strengthen steadily throughout. 2022 at 6.3 per dollar.

“Thus, the large current account surplus will provide a sufficient buffer for the yuan even if the greenback strengthens at this point.”

As of noon, the broad dollar index fell to 96.478 from the previous close of 96.517, while the offshore yuan traded at 6.3824 per dollar.

The yuan market at 04:00 GMT:


Key indexes:

* Divergence in 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 2% from the official median rate it sets each morning.


* Premium for the offshore spot on onshore

** The figure reflects the difference from the official midpoint of the PBOC, as undeliverable futures are settled relative to the midpoint. .

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Reporting by Winni Zhou and Andrew Galbraith; Editing by Sam Holmes

Our standards: Thomson Reuters Trust Principles.

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