China's renmimbi/yuan firms as US jobs data temper dollar bulls
Shanghai (Sept 5) China's yuan firmed slightly on Monday despite a weaker midpoint setting by the central bank, as a disappointing U.S. jobs report reduced chances of a U.S. rateincrease this month and kept the U.S. dollar on the back foot.
The People's Bank of China set the midpoint rate at 6.6873 per dollar prior to market open, weaker than theprevious fix at 6.6727.
The spot market opened at 6.6800 per dollar andwas changing hands at 6.6783 at midday, about 0.1 percentstronger compared to Friday's close at 6.6821, and 0.13 percenthigher than the midpoint.
Traders said the yuan firmed in tandem with the globaldollar index , which tracks the greenback against a basketof currencies, easing off to 95.753 from the previous close of95.844.
U.S. non-farm payrolls rose by a weaker-than-expected151,000 jobs last month, reducing expectations that the FederalReserve will raise rates later this month. Still, traders noted the dollar's losses were limited as theunderlying strength in the U.S. economy meant the Fed remains ontrack to tighten by year-end.
A Shanghai-based trader at a domestic commercial bank saidthe yuan is on a gradual depreciation path over the long run.
"The dollar is relatively strong, and it will pressure theyuan to depreciate slowly over the long run," he said.
Offshore one-year non-deliverable forwards contracts(NDFs) , considered the best available proxy forforward-looking market expectations of the yuan's value, tradedat 6.8375, 2.20 percent weaker from the midpoint.
China and the United States on Sunday committed anew torefrain from competitive currency devaluations, and China saidit would continue an orderly transition to a market-orientedexchange rate for the yuan .
The remarks came from a joint "fact sheet", issued a dayafter U.S. President Barack Obama and his Chinese counterpart XiJinping held talks in Chinese eastern city of Hangzhou, whereleaders from the world's 20 leading economies, the G20, weregathering for a summit on Sunday and Monday. The three-month NDFs contract also breachedthe psychologically important 6.7 per dollar and stood at 6.7230in morning trade.
The Thomson Reuters/HKEX Global CNH index , whichtracks the offshore yuan against a basket of currencies on adaily basis, stood at 94.91, weaker than the previous day's95.07.
One-year NDFs are settled against the midpoint, not the spotrate.
The yuan market at 3:35 AM GMT:
ONSHORE SPOT: Item Current Previous Change PBOC midpoint 6.6873 6.6727 -0.22% Spot yuan 6.6783 6.6821 0.06% Divergence from -0.13% midpoint* Spot change YTD -2.77% Spot change since 2005 23.93% revaluation