SHANGHAI — The yuan rose against the
dollar for a fourth straight session on Thursday, breaching a
key threshold to its strongest level in nearly fourth months,
underpinned by sustained capital inflows
as global investors pile into a rally in Chinese stocks.
Chinese shares advanced for the eighth session in a row to
multi-year highs, supported by signs the country’s economic
recovery is gathering pace and by retail investor enthusiasm.
Prior to the market opening, the People’s Bank of China
(PBOC) set the midpoint rate at 7.0085 per dollar,
122 pips, or 0.17%, firmer than the previous fix of 7.0207, and
the strongest since March 16.
But, the guidance rate continued to be fixed weaker than
forecasts, as it was in the previous two sessions, raising
questions among traders over whether the central bank is
comfortable with the recent sharp appreciation while exports
Thursday’s official fixing was 43 pips softer than Reuters’
estimate of 7.0042.
In the spot market, onshore yuan opened at 6.9965
per dollar, breaching the closely watched 7 mark. It jumped to a
high of 6.9875 at one point, the highest level since March 17.
By midday, the spot yuan was changing hands at 6.9902, 147
pips firmer than the previous late session close.
The Chinese currency has gained 1.1% to the dollar so far
this week, and is on course for the best weekly performance
since January 2019.
Several yuan traders said positions were heavy at the 7 per
dollar level. Many corporate clients and investors sold their
dollars after the yuan rose past that mark, accelerating the
gains in the local currency on Thursday.
Kevin Wu, head of global markets at Hang Seng Bank in
Shanghai, said recent rises in the yuan were within expectations
as China’s economic prospects were optimistic while monetary
policy was relatively restrained compared with some developed
“Against the backdrop of the U.S. Federal Reserve’s
high-level easing, dollar will stay under pressure and could
provide further upside room for the yuan,” he said.
Wu added that the yuan was highly sensitive to Sino-U.S.
relations and warned that market needed to pay close attention
to developments in the bilateral relations.
Data on Thursday showed China’s factory gate prices fell for
a fifth straight month in June as the coronavirus pandemic
weighed heavily on industrial demand, although signs of a pickup
in some parts of the sector suggest a slow economic recovery
The yuan market at 0400 GMT:
Item Current Previous Change
PBOC midpoint 7.0085 7.0207 0.17%
Spot yuan 6.9902 7.0049 0.21%
Divergence from -0.26%
Spot change YTD -0.39%
Spot change since 2005 18.40%
Item Current Previous Change
Thomson 92.61 92.51 0.1
Dollar index 96.287 96.454 -0.2
*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
OFFSHORE CNH MARKET
Instrument Current Difference
Offshore spot yuan 6.9885 0.02%
Offshore 7.1178 -1.54%
*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