Chinese companies in yuan as c.bank keeps MLF rate unchanged, Fed in focus


SHANGHAI, Dec. 15 (Reuters) – The Chinese yuan strengthened on Wednesday after the central bank left a policy rate unchanged, as new data shows factory output rose faster than expected, but traders and analysts expect the currency’s further gains to be limited.

Traders said moves would also be muted as global markets await the results of the U.S. Federal Reserve policy meeting.

“Probably not much will happen today, the yuan cannot move. The market expects the Fed to fall faster, which will push the dollar index up, but the yuan is still the same, “a trader told a foreign bank.

Register now for FREE and unlimited access to reuters.com

Register

Ahead of the market opening, the PBOC pegged the yuan’s daily midpoint at 6.3716 per dollar, its lowest in just over a week.

The spot yuan opened at 6.3660 to the dollar and firmed at 6.3644 by noon, 26 pips above Tuesday’s trading close. The offshore yuan strengthened to 6.3705 to the dollar from a close of 6.3736.

The Chinese unit even took another step against a trade-weighted basket of currencies (.CFSCNYI), reaching its highest level since November 2015.

The spot yuan strengthened slightly after the People’s Bank of China (PBOC) injected 500 billion yuan into the financial system on Wednesday through its Medium-Term Loan Facility (MLF), partially rolling over maturing loans but leaving the interest rate unchanged. Read more

The MLF injection was accompanied by the implementation of a previously announced reduction in the reserve requirement ratio (RRR) of banks, which freed up 1,200 billion yuan of long-term funds.

The reduction in the RRR reflects a gradual shift in policymakers in Beijing, spurred by concerns about weakening economic growth, towards policy easing.

New data on Wednesday further illustrated the mixed economic situation, with factory production increasing faster than expected in November, as retailers suffered new restrictions to tackle rising COVID-19 cases and the investment growth slowed. Read more

But Ken Cheung, chief Asian currency strategist at Mizuho Bank, said the decision not to lower the MLF rate, which ran counter to some market expectations of a lower benchmark loan prime rate this year. this month, suggested that easing signals had receded.

“There is no clear relationship between lowering the RRR and lowering rates,” he said, noting that the absence of a MLF rate cut had pushed up the yuan’s points as investors reconsidered. expectations of political divergence between the United States and China.

The yuan market at 04:03 GMT:

PLACE ON LAND:

Key indexes:

* Divergence in 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 2% from the official median rate it sets each morning.

CNH OFFSHORE MARKET

* Premium for the offshore spot on onshore

** The figure reflects the difference from the official midpoint of the PBOC, as undeliverable futures are settled relative to the midpoint. .

Register now for FREE and unlimited access to reuters.com

Register

Reporting by Andrew Galbraith and Jindong Zhang; Editing by Sam Holmes

Our standards: Thomson Reuters Trust Principles.

About Vicki Davis

Check Also

Why does it make sense for Indian investors to diversify into US stocks?

By Raj Gandhi Investing around 15-20% of your portfolio in US markets is a good …