Yuan Eases On Dollar Demand

Yuan Eases On Dollar Demand

22 Feb 2021 11:04 AM

The yuan eased today, pressured by seasonal corporate dollar demand and with sentiment dented by China's potential plans to allow more capital outflows.

Although the timeline for the plan is unclear, traders and analysts said the move suggests the authorities have become increasingly uncomfortable with the yuan's strength and growing concerns about bubble risk in some domestic markets.

In the spot market, onshore yuan opened at 6.4585 per dollar and was changing hands at 6.4625 at midday, 27 pips weaker than the previous late session close, in spite of a firmer midpoint fixing.

The People's Bank of China (PBOC) set the midpoint at 6.4563 per dollar, 61 pips firmer than previously.

Several traders said corporate dollar demand had picked up recently as manufacturing and business resumed after the week-long Lunar New Year holiday.

A trader at a Chinese bank said the market was wary of the global reflation trade against the backdrop of rising long-term U.S. Treasury yields, which could be a headwind for the yuan.

Meanwhile, there was little reaction to China keeping its benchmark lending rate for corporate and household loans steady for the 10th straight month at its February fixing on Saturday, matching market expectations.