China’s yuan steady after dollar rebound

SHANGHAI, Aug 16 (Reuters) –China’s yuan steadied against the dollar on Friday after sliding overnight as the greenback benefited from receding recession fears thanks to slew of strong U.S. economic data

The two-year U.S. treasury yield US2YT=RR hovered near a more than one-week high on the day and the dollar index steadied after a rise in the New York session on Thursday.

“The string of U.S. economic data we have gotten since the last employment report including retail sales and weekly jobless claims suggests that we are unlikely in the midst of a recession,” said Alvin Tan, head of Asia FX strategy at RBC Capital Markets.

“A U.S. soft landing scenario is coming back into focus,” Tan said.

At home, China’s July economic data suggested the growth momentum remained weak.

UBS’s chief China economist Tao Wang sees notable downside risk to the bank’s current GDP forecast of 4.9%, due to the bigger drag coming from the property sector and tighter-than-budgeted fiscal policy stance.

The spot yuan CNY=CFXS opened at 7.1793 per dollar and was last trading 4 pips firmer than the previous late session close at 7.1750 as of 0326 GMT and 0.4% weaker than the midpoint.

Prior to the market opening, the People’s Bank of China (PBOC) set the midpoint rate CNY=PBOC, around which the yuan is allowed to trade in a 2% band, at 7.1464 per dollar, 275 pips firmer than a Reuters’ estimate.

China will stick to a supportive monetary policy and maintain policy stability, its central bank governor Pan Gongsheng said in an interview with state news agency Xinhua on Thursday.

The yuan is up 0.6% against the dollar this month but still 1.0% weaker for the year. It has been under pressure since early 2023 as domestic pressure around a moribund property sector, anaemic consumption and falling yields drive capital flows out of yuan, and foreign investors stay away from its struggling stock market.

The offshore yuan CNH=D3 traded at 7.1743 yuan per dollar CNH=, up about 0.09% in Asian trade.

The dollar’s six-currency index =USD was 0.116% lower at 102.92.

Key onshore vs offshore levels:

• Overnight dollar/yuan swap onshore -24.00 pips vs. offshore -24.00

• Three-month SHIBOR SHIBOR= 1.8 % vs. 3-month CNH HIBOR 2.3 %

LEVELS AT 02:55 GMT

Reporting by Shanghai Newsroom
Editing by Shri Navaratnam