SHANGHAI, July 9 (Reuters) - China's yuan slipped on
Tuesday against the U.S. dollar, as the central bank set a
weaker daily official guidance rate, while traders awaited
testimony from Federal Reserve Chair Jerome Powell for clues on
the trajectory of U.S. interest rates.
Despite the dollar index hovering near a multi-week
low, the People's Bank of China (PBOC) set a weaker fix after
strengthening it for the past three sessions.
Traders will pay close attention to comments by Fed's Powell
when he testifies before Congress on Tuesday and Wednesday.
"If Powell hints that the Fed is closer to an interest rate
cut in September, it could send the dollar index below 104.75, a
critical support level," said Philip Wee, senior FX strategist
at DBS.
The dollar index is at 105.
Prior to the market opening, the PBOC set the midpoint rate
, around which the yuan is allowed to trade in a 2%
band, at 7.1310 per dollar, 1,366 pips firmer than a Reuters'
estimate.
As of 0301 GMT, the spot yuan opened at 7.2683
per dollar and was last trading at 7.2726, 28 pips weaker than
the overnight session's close.
The spot yuan is only 10 pips away from the lower bound of
daily trading limit.
The yuan has weakened 2.3% so far this year, and has been
under pressure since early 2023 as domestic woes around a
moribund property sector, anaemic consumption and falling yields
drive capital flows out of yuan, while foreign investors stay
away from its struggling stock market.
Citi traders, however, see further upside in the offshore
yuan, as long-dated bond yields edged higher after the PBOC
announced temporary liquidity operations on Monday.
Several analysts believed that the new tool could also help
relieve some pressure on the yuan as the bank could better
manage liquidity and short-term interest rates.
The offshore yuan traded at 7.292 yuan per dollar,
down about 0.08% in Asian trade.
Key onshore vs offshore levels:
• Overnight dollar/yuan swap onshore -7.70 pips vs. offshore
-7.70
• Three-month SHIBOR 1.9 % vs. 3-month CNH HIBOR
3.1 %
LEVELS AT 0301 GMT
INSTRUMENT CURRENT UP/DOWN % DAY'S DAY'S
vs USD (-) VS. CHANGE HIGH LOW
PREVIOU YR-TO-
S CLOSE DATE
%
Spot yuan 7.2726 -0.05 -2.35 7.2679 7.2726
