SINGAPORE (Reuters) – China’s yuan was on track for its biggest gain in two weeks on Monday, benefiting from a broad sell-off in the dollar as investors bet on a U.S. interest rate cut, but it weakened against the strong yen.
The Chinese currency rose to 7.1314 yuan per dollar in afternoon trading, and was last up about 0.4 percent at 7.1363 yuan, its biggest daily gain since early August.
The rally brings the yuan back to the middle of its daily trading range — after months of remaining at the lower end — although this is mostly due to a weaker dollar rather than improved sentiment.
The yen’s gains continued to weigh on the yuan against a basket of trading partners, where it hit 98.07 yen, its lowest since Jan. 15, according to Reuters calculations from official data. The yuan fell 1 percent to 20.38 yen, its biggest decline since Aug. 5.
Traders are awaiting China’s decision to set key interest rates on Tuesday, amid a slowdown in bank lending, falling housing prices and poor economic conditions that analysts believe will prevent the currency from making further gains.
“The weak outlook for the Chinese economy and expectations of further monetary easing could undermine investor confidence in Chinese assets and thus reduce demand for the yuan,” analysts at the Commonwealth Bank of Australia said.
“The yuan is unlikely to benefit much from a weaker US dollar due to an improving global economy,” they added.
Globally, Federal Reserve Chairman Jerome Powell is expected to make the case for interest rate cuts in a speech on Friday.
Yields on Chinese government bonds fell 1.8 basis points to 2.17%. The yield on comparable U.S. government bonds was 3.9%.
The benchmark seven-day repurchase rate of the Chinese yuan in the onshore market was 1.74%, and in the futures market, the three-month yuan was quoted at 7.0695, about 722 points higher than the spot market. The three-month yuan futures contract was quoted at 7.0682 against the dollar.
The People’s Bank of China set the midpoint rate, around which the yuan is allowed to trade within a 2% band, at 7.1415 per dollar on Monday, 133 pips above Reuters estimates. Key onshore/offshore levels: * Overnight USD/yuan swap onshore -7.25 pips vs. offshore -7.25 * Three-month SHIBOR 1.8% vs. 3-month CNH HIBOR 2.2%
Levels at 07:00 GMT
Current Instrument Up/Down (-) % Change Daily High
Against the US dollar against the previous low of this year
Closes %
Spot Yuan 7.1417 0.33 -0.56 7.1314 7.1585
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Marine 7.1411 0.3 -0.22 7.1278 7.1641
yuan spot
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