China’s yuan on Thursday eased from a six-month peak against the US dollar that it hit a day earlier, as a weaker-than-expected official guidance discouraged investors from chasing the currency further.
Prior to the market opening, the People’s Bank of China (PBoC) set the midpoint rate at 6.3719 per dollar, 23 pips weaker than the previous fix of 6.3693.
However, many market analysts and traders said Thursday’s official guidance rate came in much weaker than their forecasts.
That is a sign that authorities may feel uncomfortable with the recent yuan rally as it headed to the strongest level this year in both onshore and offshore trades.
“The inflow of money into Chinese assets is one of several reasons why the yuan is so strong,” Kit Juckes, a macroeconomic strategist at Société Générale in London, said.
Thursday’s official fixing was 71 pips softer than Reuters’ forecast of 6.3648.
In the spot market, the onshore yuan opened at 6.3705 per dollar and was changing hands at 6.3693 at midday, 5 pips weaker than the previous late session close.
The spot rate hit a six-month high of 6.3596 per dollar on Wednesday, not far from this year’s high of 6.3565, and is up about 2.5% year-to-date to become one of the best performing Asian currencies in 2021.
The yuan appreciated about 1% against the US dollar in October, marking the largest month-to-month appreciation in five months.
“The renminbi appreciation was a notable phenomenon,” CICC analysts said in a note. “Overall, we think the elevated monetary market rates and loose foreign exchange supply supported renminbi appreciation.”
- George Russell, with Reuters
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