新2注册:China's yuan rebounds from 2-year low on firmer-than-expected guidance
SHANGHAI: China's yuan rebounded on Thursday from a two-year low against the dollar, helped by a firmer-than-expected official guidance, which markets participants saw as a sign authorities are becoming increasingly uncomfortable with rapid yuan losses.
Prior to the market opening, the People's Bank of China (PBOC) set the midpoint rate at 6.8536 per dollar, 148 pips or 0.22% weaker than the previous fix 6.8388, the softest since Aug. 31, 2020.
But, analysts and traders said the official midpoint failed to come in as weak as they had projected, and Thursday's guidance rate was 110 pips firmer than Reuters' estimate of 6.8646.
"The midpoint was way beyond expectations, my feeling is that the central bank has a firm attitude in defending the currency," said a trader at a Chinese bank.
The firmer-than-expected midpoint lifted the spot market higher. The onshore yuan rebounded from a two-year low of 6.8704 hit a day earlier to trade at 6.8532 as of 0200 GMT.
Its offshore counterpart also followed suit, bouncing from two-year lows to hit 6.8634 per dollar.
The Chinese yuan has lost about 1.6% against the dollar so far in August. While the slowing domestic economy has weighed on the local currency, the fall also comes as the U.S. dollar has been buoyed by expectations of aggressive Federal Reserve tightening.,
The move had led to some market speculation that Beijing could allow further yuan weakness to boost its vast export sector.
"The strong RMB fixing shall help dismiss the notion that a weak currency is a policy option to support growth," said Frances Cheung, rates strategist at OCBC Bank.
Peiqian Liu, chief China economist at NatWest, also believed that the recent yuan weakness has been mostly market-driven.
"We don't see evidence of competitive devaluation - FX weakness likely benefits only a small proportion of China’s exports in value terms," she said.
Liu expects the yuan to trade in a range of 6.75 to 6.95 per dollar, with risks of testing the psychologically critical 7 per dollar in coming months.
Sources told Reuters on Wednesday that China's foreign exchange regulator phoned several banks to warn them against aggressively selling the Chinese currency.
Earlier on Wednesday, Chinese state media cited market analysts as saying that the yuan has no basis for long-term depreciation, but officials have thus far been publicly quiet on the market moves. - Reuters