Yuan eases off 1-mth high, focus back on trade after upbeat GDP

SHANGHAI, April 18 (Reuters) - China's yuan eased off a
one-month high against the U.S. dollar on Thursday, as some
companies took advantage of a much stronger midpoint to load up
on the greenback.
After strong gains in the previous session sparked by upbeat
economic data, traders' attention was returning to the progress
of U.S.-China trade talks, with the Wall Street Journal saying a
deal may be ready to be signed by late May or early
Prior to the market opening on Thursday, the People's Bank
of China (PBOC) lifted its official yuan midpoint to
6.6911 per dollar, 199 pips, or 0.3 percent firmer than the
previous fix of 6.7110.
It was the strongest fixing since March 21.
In the spot market, yuan opened at 6.6860 and
rose to a high of 6.6854 at one point, the firmest level since
March 21.
But, as of midday, it was changing hands at 6.6947, 67 pips
weaker than the previous late session close and 0.05 percent
softer than the midpoint.
The Chinese currency leapt on Wednesday as a raft of
stronger-than-expected economic data suggested the slowing
economy may be starting to stabilise.
Though analysts cautioned it was too early to call a
turnaround, the numbers suggested the economy may be bottoming
out a bit sooner than expected, and some market watchers bumped
up their full-year economic forecasts.
Robin Xing, economist at Morgan Stanley, raised his growth
forecast by 0.2 percentage point to 6.5 percent this year and
6.3 percent in 2020.
"(We) maintain our view of a growth upturn in 2Q-4Q19 as
fiscal easing fully kicks in, trade tensions ease, and consumer
confidence normalizes," he said in a note on Thursday.
Traders many offshore institutions started building long
yuan positions following the strong data on Wednesday.
But in the onshore market, a trader at a Chinese bank said
supply and demand was "not in favor of a strong yuan" for now,
noting most of the gains in the past two days were tracking the
those in the offshore market.
"For now, (onshore) corporate client's expectations do not
seem to have changed much," the trader said.
Economists at BNP Paribas China expect the yuan to remain in
a tight range.
"While growth stabilization and a possible trade deal
support the RMB, weak exports imply a strong currency is
infeasible," they said in a note on Thursday.
A CNBC report said Chinese officials were identifying travel
dates on U.S. President Donald Trump's calendar that might offer
potential for a summit between leaders of the two nations.

"Our forecast for the USD/CNY of 6.75 by the end of the year
essentially tracks the development of trade talks. But we need
to closely monitor the yuan's moves post-trade talks to
determine if we need to revise up our yuan forecast in 2Q and
3Q," ING's Greater China economist Iris Pang said in a note.
The global dollar index rose to 97.052 at midday from
the previous close of 97.009.
The offshore yuan was trading at 6.6937 per dollar
as of midday.
China's foreign exchange regulator said on Thursday the U.S.
Federal Reserve's policy stance will be favourable for the
nation's capital flows, and expected the cross-border capital
flows to remain steady despite some uncertainties.

The yuan market at 0301 GMT:

Item Current Previous Change
PBOC midpoint 6.6911 6.711 0.30%

Spot yuan 6.6947 6.688 -0.10%

Divergence from 0.05%
Spot change YTD 2.66%
Spot change since 2005 23.63%

Key indexes:

Item Current Previous Change

Thomson 96.18 96.14 0.0
CNH index
Dollar index 97.052 97.009 0.0

*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 percent from official midpoint rate it sets each


Instrument Current Difference
from onshore
Offshore spot yuan 6.6937 0.01%
Offshore 6.728 -0.55%

*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

2019-04-18 05:41:33

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