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Yuan eases against dollar, offshore level again weaker amid global tension

Yuan eases against dollar, offshore level again weaker amid global tension

The yuan eased against the U.S. dollar on Wednesday despite the setting of a firmer midpoint, as worries about geopolitical tensions broadened. Also, the offshore yuan was trading weaker than the onshore one for a second day, the first time offshore markets have been more bearish on the Chinese currency than the onshore one since early March. The yuan softness comes as global investors have moved into safe haven assets such as U.S. Treasuries, gold and the yen following the U.S. missile strike on Syria, and rising tensions over North Korea. Prior to market open on Wednesday, the People’s Bank of China set the midpoint rate at 6.8940 per dollar, firmer than the previous fix of 6.8957. The spot market opened at 6.8960 per dollar and was changing hands at 6.8980 at midday, 77 pips away from the previous late session close. Traders say Beijing’s capital controls have largely shielded the onshore yuan market from global volatility, contributing to yuan’s relative stability recently. For China, “stability is the main theme for this year… so the (onshore) market moves within a limited range and is generally quiet,” said a trader at a Japanese bank in Shanghai. He also said that news that China’s producer price inflation cooled for the first time in seven months in March didn’t have any impact on the yuan.

The yuan market at 5:15AM GMT:

ONSHORE SPOT:

Item Current Previous Change PBOC midpoint 6.894 6.8957 0.02% Spot yuan 6.898 6.8903 -0.11% Divergence from 0.06%

midpoint*

Spot change YTD 0.71% Spot change since 2005 19.98%

revaluation

Key indexes:

Item Current Previous Change Thomson 94.28 94.41 -0.1

Reuters/HKEX CNH index

Dollar index 100.71 100.71 0.0

*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 percent from official midpoint rate it sets each morning.

OFFSHORE CNH MARKET

Instrument Current Difference

from onshore

Offshore spot yuan 6.903 -0.07% * Offshore 7.0915 -2.79%

non-deliverable forwards

**

*Premium for offshore spot over onshore

**Figure reflects difference from PBOC’s official midpoint, since non-deliverable forwards are settled against the midpoint. .