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Yuan eases on higher corporate dollar demand, investors await Q1 GDP

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SHANGHAI — China’s yuan eased against

the dollar on Thursday, snapping three straight days of gains on

higher seasonal corporate greenback demand, while investors

awaited first quarter GDP data for clues about the monetary

policy outlook.

Prior to market opening, the People’s Bank of China (PBOC)

set the midpoint rate at 6.5297 per dollar, 65 pips

or 0.1% firmer than the previous fix of 6.5362.

In the spot market, the onshore yuan opened at

6.5315 per dollar and was changing hands at 6.5392 at midday, 87

pips weaker than the previous late session close.

Traders said the yuan continued to swing in a tight range

around 6.55 per dollar, with weakness in the morning session

driven by companies seeking to settle dollar payments. Several

market participants expected the local unit to continue tracking

dollar movements in the near-term.

The yuan “should continue to trade along with the broader EM

FX,” Brown Brothers Harriman said in a note.

“However, the PBOC has allowed only limited weakness so far

this year and we expected this to continue,” it said, adding

revived dollar strength could continue to weaken the yuan.

Separately, China’s central bank injected 150 billion yuan

($22.94 billion) worth of medium-term loans into the banking


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system earlier in the session, roughly matching 100 billion yuan

worth of maturing such loans and another 56.1 billion yuan worth

of targeted medium-term lending facility (TMLF) expiring later

this month.

Traders and analysts said the central bank was keen to

maintain a neutral stance despite higher cash demand expected in

coming days due to quarterly tax payments.

Stephen Innes, chief global markets strategist at Axi, said

the operations suggested that “the bank was likely to maintain

zero net injections,” which was “not great for an economy that

was not overheating.”

However, some currency traders said a lot of market

attention would be soon shifted to China’s first quarter GDP,

which is expected to show a strong economic rebound during the

period due to low base effect, to gauge if policymakers would

make any changes to its monetary policy stance.

“We expect real GDP growth to have jumped to 20%

year-on-year in Q1 from 6.5% in Q4-2020, led by an overheated

industrial sector and a recovering services sector,” economists

at Standard Chartered said in an earlier note.

The global dollar index rose to 91.683 by midday,

while the offshore yuan was trading at 6.5426 per


The yuan market at 0400 GMT:


Item Current Previous Change

PBOC midpoint 6.5297 6.5362 0.10%

Spot yuan 6.5392 6.5305 -0.13%

Divergence from 0.15%


Spot change YTD -0.17%

Spot change since 2005 26.57%


Key indexes:


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Item Current Previous Change

Thomson 96.31 96.34 0.0


CNH index

Dollar index 91.683 91.619 0.1

*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



Instrument Current Difference

from onshore

Offshore spot yuan 6.5426 -0.05%


Offshore 6.7224 -2.87%




*Premium for offshore spot over onshore

**Figure reflects difference from PBOC’s official midpoint,

since non-deliverable forwards are settled against the midpoint.


($1 = 6.5388 Chinese yuan)

(Reporting by Winni Zhou and Andrew Galbraith; Editing by Sam



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