SHANGHAI, June 6 (Reuters) - China's yuan firmed on Thursday as the dollar eased on renewed bets of a U.S. Federal Reserve easing cycle this year, with market participants awaiting a policy decision from the European Central Bank later in the day for its interest rate outlook. Prior to the market open, the People's Bank of China set the midpoint rate, around which the yuan is allowed to trade in a 2% band, at 7.1108 per U.S. dollar, weaker than the previously fixed 7.1097. In the spot market, the onshore yuan opened at 7.2441 per dollar and was changing hands at 7.2447 at midday, 30 pips stronger than the previous late session close. Expectations that the Fed would likely cut interest rates in September, after data this week hinted the U.S. labour market was easing. Markets have priced in nearly 50 basis points of Fed rate cuts this year, with the first expected to come in September. Investor focus is also on the U.S. nonfarm payroll (NFP) report for May due on Friday, with a Reuters poll of economists expecting it to increase by 185,000 jobs. Meanwhile, a rate cut is also widely expected from the ECB later in the day. Maybank analysts expected the dollar index to be traded between 104.00 and 105.00 but it might drop a little lower below that range if NFP reading is favourable. Adtionally, a private sector survey showed on Wednesday that China's services activity in May accelerated at the quickest pace in 10 months, while staffing levels expanded for the first time since January, pointing to a sustained recovery in the second quarter. "We cannot rule out a slow creep up for the USDCNH and USDCNY given unfriendly geopolitical environment where trade tensions are rising with the U.S. and EU," said Maybank analysts in a note. The global dollar index fell to 104.102 from the previous close of 104.268. The offshore yuan was trading at 7.2562 per dollar. The yuan market at 4:05AM GMT: ONSHORE SPOT: Item Current Previous Change PBOC midpoint -0.02% 7.1108 7.1097 Spot yuan 0.04% 7.2447 7.2477 Divergence from midpoint* 1.88% Spot change YTD -2.03% Spot change since 2005 revaluation 14.24% *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 * -0.16% 7.2562 Offshore non-deliverable 7.037 1.05% forwards ** (Reporting by Shanghai Newsroom; Editing by Rashmi Aich)
China's yuan firms on fresh Fed rate-cut bets; ECB policy decision on tap
Published on 06/06/2024 at 00:38
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