SHANGHAI, July 25 (Reuters) – The Chinese yuan eased against the dollar on Monday as COVID-19 cases in the country’s trading hub continued to weigh on sentiment ahead of major policy meetings at home and abroad.
Investors remain worried about possible major disruptions to economic activity after Shanghai ordered residents of nine of the city’s districts and some smaller areas to take COVID-19 tests from July 26-28, in due to sporadic cases.
“Ahead of sentiment deteriorating due to China’s lingering COVID situation and uncertainty surrounding China’s real estate sector, the yuan is likely to remain under pressure in the near term,” said Li Lin, chief financial officer. global markets research for Asia at MUFG Bank.
Li was referring to a recent mortgage boycott, which was prompted by a growing number of homebuyers who refused to repay their loans for unfinished apartments across the country.
Before the market opened, the People’s Bank of China (PBOC) set the midpoint rate CNY=PBOC at 6.7543 on the dollar, 21 pips lower than the previous fix of 6.7522.
In the spot market, the onshore yuan CNY=CFXS opened at 6.7554 to the dollar and was changing hands at 6.7560 midday, 42 pips lower than the previous late session close.
Traders said the yuan was likely to come under downward pressure this week as the dollar could remain strong ahead of the Federal Reserve’s policy meeting on July 26-27, when it is expected to rise. interest rates by an additional 75 basis points. XRF/
Separately, in China, a Politburo meeting this week is also in focus, where a high-level decision-making body will meet to discuss economic policies for the rest of the year.
“We don’t believe Beijing will launch an all-out campaign to meet the annual growth target of around 5.5%, which is clearly out of reach now,” said Lu Ting, chief China economist at China. Nomura.
“Policymakers’ attention has now shifted to fiscal policy and the real estate sector since the cut in the reserve requirement ratio (RRR) in April, and this shift will likely continue into the second half of the year.”
At noon, the global dollar index .DXY fell to 106.632 from the previous close of 106.73, while the offshore yuan CNH=D3 was trading at 6.759 to the dollar.
The yuan market at 04:01 GMT:
SPOT ON LAND:
PBOC midpoint CNY=SAEC
spot yuan CNY=CFXS
Divergence from midpoint*
YTD spot change
One-time change since 2005 reassessment
Thomson Reuters/HKEX CNH Index
*Divergence of the dollar/yuan exchange rate. A negative number indicates that the spot yuan is trading stronger than the midpoint. The People’s Bank of China (PBOC) allows the exchange rate to rise or fall by 2% from the official midpoint rate it sets each morning.
CNH OFFSHORE MARKET
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