China yuan little changed, Hu's trip in focus
SHANGHAI: China's yuan ended barely changed against the dollar on Wednesday, offseting a record high fixing, as investors grew cautious that the Chinese central bank could pull the yuan back after President Hu Jintao's U.S. visit.
The Chinese president arrived in the United States on Tuesday for a four-day state visit peppered by U.S. complaints about Beijing's currency policies.
The Hu-Obama summit began at 1500 GMT and joint news conference at 1805 GMT.
The yuan in the spot market closed at 6.5824 per dollar, almost flat from Tuesday's 6.5829, after China's central bank set the daily mid-point for the yuan at a record high of 6.5885, up from Tuesday's 6.5891.
The yuan has risen 3.70 since its mid-June depegging. "From the mid-point and the spot yuan trade range, it's clear the market has no expectations of a further rise in the yuan after Hu finishes his visit," said a dealer at an Asian bank in Shanghai.
Dealers said a sharp yuan rise would attract large fund flows into the Chinese market, so hot money and inflationary pressure would compel the People's Bank of China to resort to more domestic tools such as interest rates and reserve requirements.
China's central bank raised lenders' required reserves 50 basis points on Friday for the fourth time in just over two months, in order to lock up more cash from the banking system.
Key economic data, including the consumer price index (CPI) for December, is due on Thursday. Hong Kong media reported the figures early, citing an unnamed central bank source, saying that CPI would rise 4.6 percent in December from a year earlier, slowing from 5.1 percent in November.
Dealers said the yuan was expected to pull back or largely t! rack the U.S. dollar index's movements after the Chinese president's 18-21 U.S. trip.
The near-term floor for the currency was seen at 6.60, with possibly a few quotations straying away from that area but not likely to reverse the fact that the yuan has entered a new range above the 6.60 level.
The Global CitiFX LM Strategy weekly report showed that it expected a 5 percent move to be a reasonable target provided the euro does not correct sharply, because the yuan was permitted to appreciate by 3.5 percent in 2010 despite the euro having fallen by more than 7 percent in 2010.
One-year dollar/yuan NDFs were bid at 6.4560, little changed from Tuesday's close of 6.4450. Their implied yuan appreciation in a year's time fell slightly to 2.05 percent from Tuesday's 2.23 percent.
At current levels, implied appreciation via one-year NDFs stands at a measly 2 percent. That is much below a Reuters poll of more than 5 percent in 2011, and well below a 4 percent expected rise in the yuan just before the G20 meeting in Seoul in November.
The Chinese president arrived in the United States on Tuesday for a four-day state visit peppered by U.S. complaints about Beijing's currency policies.
The Hu-Obama summit began at 1500 GMT and joint news conference at 1805 GMT.
The yuan in the spot market closed at 6.5824 per dollar, almost flat from Tuesday's 6.5829, after China's central bank set the daily mid-point for the yuan at a record high of 6.5885, up from Tuesday's 6.5891.
The yuan has risen 3.70 since its mid-June depegging. "From the mid-point and the spot yuan trade range, it's clear the market has no expectations of a further rise in the yuan after Hu finishes his visit," said a dealer at an Asian bank in Shanghai.
Dealers said a sharp yuan rise would attract large fund flows into the Chinese market, so hot money and inflationary pressure would compel the People's Bank of China to resort to more domestic tools such as interest rates and reserve requirements.
China's central bank raised lenders' required reserves 50 basis points on Friday for the fourth time in just over two months, in order to lock up more cash from the banking system.
Key economic data, including the consumer price index (CPI) for December, is due on Thursday. Hong Kong media reported the figures early, citing an unnamed central bank source, saying that CPI would rise 4.6 percent in December from a year earlier, slowing from 5.1 percent in November.
Dealers said the yuan was expected to pull back or largely t! rack the U.S. dollar index's movements after the Chinese president's 18-21 U.S. trip.
The near-term floor for the currency was seen at 6.60, with possibly a few quotations straying away from that area but not likely to reverse the fact that the yuan has entered a new range above the 6.60 level.
The Global CitiFX LM Strategy weekly report showed that it expected a 5 percent move to be a reasonable target provided the euro does not correct sharply, because the yuan was permitted to appreciate by 3.5 percent in 2010 despite the euro having fallen by more than 7 percent in 2010.
One-year dollar/yuan NDFs were bid at 6.4560, little changed from Tuesday's close of 6.4450. Their implied yuan appreciation in a year's time fell slightly to 2.05 percent from Tuesday's 2.23 percent.
At current levels, implied appreciation via one-year NDFs stands at a measly 2 percent. That is much below a Reuters poll of more than 5 percent in 2011, and well below a 4 percent expected rise in the yuan just before the G20 meeting in Seoul in November.
Comments