(CTN News) – As investors wait impatiently for manufacturing activity statistics for more indication, the Chinese yuan fell versus the dollar on Monday, following the official midpoint’s decision to end five consecutive sessions of rising.
This week, the highly anticipated purchasing managers index for November is set to be released by China.
Following a series of contradictory reports in October that suggested a rocky road to recovery, the data is seen as a leading indication of the state of the world’s second-largest economy.
The People’s Bank of China (PBOC) established the midpoint rate, the range within which the yuan can be traded within a 2% band, at 7.1159 per dollar before the market opened, 8 pips lower than the previous fix of 7.1151.
Traders and experts noted that the trend of setting the daily midpoint rate with a strengthening bias had been maintained for months, and Monday’s fixing was the first weakness since November 17. Despite this, the fix was firmer than market participants had anticipated.
Reuters had predicted a midpoint of 7.1461 on Monday, but the market closed 302 pips higher.
“The PBOC’s setting of the USD/CNY fixing will be an ongoing fixation,” HSBC analysts noted.
We have seen that the USD/CNY pair has been set lower than anticipated. However, there has been a recent trend of spot prices drifting higher. The recent strength of the RMB may be fading.
They said that the “reminder that the economy is running at a subdued level, which argues against the yuan strength” should be sent out by China’s PMIs, which are due later this week.
Midway through the trading day, the onshore yuan was trading at 7.1525 per dollar on the spot market, down 37 pips from its previous late session finish of 7.1420.
An analyst at a Chinese bank said, “seasonal corporate dollar settlement should emerge soon to support the yuan,” suggesting that the yuan market would consolidate around current levels shortly following recent gains.
To cover a variety of expenses, including year-end bonus distributions, Chinese exporters typically convert a larger portion of their foreign exchange profits into yuan closer to the end of the year. These dollar/yuan conversions should support the local currency.
Trading at 7.1599 to the dollar, the offshore yuan sank to 103.388 by lunchtime, while the global dollar index had closed at 103.403.