Banknotes of Chinese yuan and U.S. dollar are seen in this illustration picture taken September 29, 2022. REUTERS/Florence Lo/Illustration
Published January 5, 2024
China’s yuan eased against the dollar on Friday, as a widening yield spread and balance sheet policy divergences between the U.S. and China remained short-term headwinds for the yuan.
The yield gap between China’s 10-year government bonds and its U.S. counterparts has widened by 24 basis points (bps) since Dec. 27 to 144 bps, with the market repricing the U.S. Federal Reserve’s policy easing and expectations for rate cuts in China continuing to build. The yield on actively traded 10-year China government bonds touched the lowest point since April 2020 on Friday. The ongoing divergence in the balance sheet policies of the Fed versus the People’s Bank of China (PBOC) is a significant short-term headwind for the offshore yuan, traders at Citi said, adding that they expect further interest rate cuts and additional loan injections via China’s pledged supplementary lending (PSL) facility.
China’s central bank made 350 billion yuan ($48.83 billion)in loans to policy banks through its PSL facility in December, fuelling expectations of increased support for the country’s ailing housing sector. “However, we expect onshore exporter USD holdings, which look abnormally large this year, to be converted to the yuan ahead of the Lunar New Year, which should drive the yuan stronger against the dollar towards the end of January or the first week of February,” the traders said. Prior to the market’s opening, the PBOC set the midpoint rate, around which the yuan is allowed to trade in a 2% band, at 7.1029 per U.S. dollar, 33 pips weaker than the previous fix 7.0997. The spot yuan opened at 7.1675 per dollar and was changing hands at 7.1684 at midday, 64 pips weaker than the previous late session close.
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SOURCE: www.zawya.com
RELATED: Chinese yuan exchange rate strengthens amid hopes for expanding trade
Meanwhile, an ongoing government review of trade agencies appears to be a significant factor in the weakening of the dollar exchange rate
FILE PHOTO: North Korean trucks can be seen heading to the Chinese side of the border on the Sino-North Korean Friendship Bridge. (Daily NK)
Published January 5, 2024
While the KPW-USD exchange rate in North Korean markets recently fell slightly, the yuan is strengthening as expectations rise about expanding trade with China.
According to Daily NK’s regular survey of market prices in North Korea, the dollar was trading at KPW 8,280 at one market in Pyongyang as of Dec. 24, 2.6% less than in the previous survey on Dec. 10.
Similar declines were also confirmed in Sinuiju and Hyesan. In Sinuiju, the dollar was trading at KPW 8,350 as of Dec. 24, 2.2% less than two weeks earlier.
The dollar’s recent weakness in North Korean markets appears partially due to the dollar’s weakening in international currency markets.
With the US Federal Reserve hinting at a possible interest rate cut, the dollar fell to 101.47 on the US Dollar Index (DXY) — which shows the dollar’s value against six nations’ currencies — as of Dec. 26.
However, an ongoing review of trade agencies by the North Korean Ministry of External Economic Relationsn has been a more significant factor in weakening the dollar in North Korea.
Daily NK reported (article in Korean) in late December that North Korean authorities recently began structural adjustments of the country’s trade sector, calling out trading companies that have failed to achieve the state’s trade targets and replacing or punishing the managers of those companies.
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SOURCE: www.dailynk.com
RELATED: How China talked markets out of a run on the yuan
Woman holds Chinese Yuan banknotes in this illustration taken May 30, 2022. REUTERS/Dado Ruvic/Illustration/File Photo Acquire Licensing Rights
Published January 2, 2024
SINGAPORE, Dec 30 (Reuters) – In recent months, China has sought to stabilise the yuan by orchestrating buying by state banks and giving market guidance to bankers.
The strategy of moral suasion marks a sharp break from Beijing’s approach the last time the currency was on the ropes, in 2015.
Back then, the People’s Bank of China (PBOC) resorted to official intervention as the central bank burned $1 trillion in reserves to shore it up.
This year, as China’s economy wobbled and money left the country, the PBOC took a starkly different approach, defending the currency by signalling to markets what kind of selling it would and would not tolerate.
Interviews with 28 market participants show at least two dozen cases where regulators closely and frequently steered market participants through a range of co-ordinated actions this year to resist strong downward pressure on the yuan.
The PBOC and State Administration of Foreign Exchange, the currency regulator, did not respond to Reuters’ faxed questions about its approach. PBOC governor Pan Gongshenghas previously said regulators would prevent exchange rate overshooting risks and maintain stable FX market operations.
The strategy market participants and analysts described to Reuters has prevented a destabilising yuan slide.
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SOURCE: www.reuters.com
