SHANGHAI, Aug 3 (Reuters) - China's yuan forwards hit a more
than 2-1/2 year high on Monday, driven by expectations of a
widening yield gap between the world's two largest economies.
One-year onshore dollar/yuan swap points rose
to 1,448 points in afternoon trade, the highest since November
2017, while the offshore swap point for the same tenor
hit 1,493 points, the loftiest since December 2017.
Traders and analysts said higher swap points in both onshore
and offshore were due to expectations of a widening yield gap
between China and the United States, a result of the divergence
in the monetary policy stances of the two countries.
"With the Chinese economy recovering, officials have
signalled that monetary policy may not be as accommodative as in
Q1," economists at ANZ said in a note.
"Instead of broad-based easing, we expect further easing to
be targeted and modest, hinging on the pace of economic
China was the world's first major economy to declare a
return growth in the second quarter after a deep slump at the
start of the year. However, unexpected weakness in domestic
consumption underscored the need for policy to bolster the
recovery after the shock of the coronavirus crisis.
Gross domestic product (GDP) rose 3.2% in the second-quarter
from a year earlier, beating market forecasts.
Yi Gang, Governor of the People's Bank of China (PBOC), said
in a recent meeting that the government would enhance the
effectiveness of monetary policy for certain sectors, according
to a statement posted on Monday morning.
Market participants also see China's macroeconomic policy
shifting to normal from emergency mode as the economy bottomed
out following a meeting by China's top decision-making body last
In the meantime, the U.S. Federal Reserve last week
maintained its dovish policy stance and pledged to "do what we
can, and for as long as it takes" to limit damage caused by
(Reporting by Winni Zhou and Andrew Galbraith; Editing by
Jacqueline Wong and Sam Holmes)