SHANGHAI: China’s yuan was steady against the dollar on Thursday, as strength in the dollar index as Middle East tensions and concerns about the Federal Reserve’s rate decisions offset some optimism from China’s better-than-expected economic data.
Beijing’s persistent stabilisation efforts to slow the yuan’s weakening trend also offered some support during the day, through the central banks’s strong fixing bias.
The People’s Bank of China set the midpoint rate, around which the yuan is allowed to trade in a 2% band, at 7.1795 per US dollar prior to market open.
In the spot market, the yuan opened at 7.3101 per dollar and was changing hands at 7.3160 at midday, 9 pips weaker from the previous late session close.
China’s economy grew at a faster-than-expected clip in the third quarter, while consumption and industrial activity in September also surprised on the upside, suggesting recent policy measures is helping to bolster a tentative recovery.
But the positivity was outweighed by a strong greenback which received support from a surge in US Treasury yields overnight amid geopolitic risks in the Middle East and the Fed’s messaging that interest rates may stay higher for longer.
Yuan leads rally in Asian currencies on China’s economic bounce
“RMB has not been able to shrug off USD strength despite China’s better-than-expected Q3 growth of 4.9%,” said DBS analysts in a note, referring to the yuan.
“Meanwhile, the onshore USD/CNY fixing had been held stable at around 7.17 for 18 straight trading days since mid-Sep, resulting in a stronger RMB basket index.”
Despite a recovery in broad economic growth, a deepening downturn in the property sector contintued to weigh on investor sentiment as data on Thursday showed China’s new home prices fell for the third straight month in September.
“RMB sentiment remains bearish due to concerns over potential bond defaults by property developers,” said Ken Cheung, chief Asian FX strategist at Mizuho Bank. “The struggling property sector remains the key drag on the recovery for China economy.”
Country Garden was due on Wednesday to pay a $15 million coupon payment on a bond due September 2025, but two bondholders of China’s biggest private property developer told Reuters they were yet to receive it.
Overseas, market attention now turns to Fed Chair Jerome Powell, who is set to speak on Thursday, for further clues of the US central bank’s policy path.
The global dollar index rose to 106.608 from the previous close of 106.565. The offshore yuan was trading at 7.3273 per dollar.
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