China’s yuan firmed against the
dollar in thin trade on Wednesday, with the market’s focus
locked on upcoming U.S. inflation data for clues to when the
Federal Reserve might start tapering its monetary stimulus.
Dealers said the spot yuan continued to swing around the 6.4
per dollar level, with many investors taking a “wait-and-see”
approach ahead of Thursday’s U.S. inflation data and European
Central Bank (ECB) meeting.
In the spot market, onshore yuan opened at 6.3975
per dollar and was changing hands at 6.3949 at midday, 61 pips
firmer than the previous late session close.
The spot yuan kept to tight range of about 50 pips, while
trading volume shrank to $12.17 billion at
midday, down from a normal half-day volume of about $15 billion.
Prior to market opening, the People’s Bank of China (PBOC)
set the midpoint rate at 6.3956 per dollar, 47 pips
weaker than the previous fix of 6.3909.
The market barely reacted to producer price index (PPI) data
showing China’s factory gate prices rose at their fastest annual
pace in over 12 years in May.
“The recent RMB appreciation did little to contain the surge
in commodity prices as well as PPI,” said Ken Cheung, chief
Asian FX strategist at Mizuho Bank in Hong Kong.
“After all, it appears that the pass-through of surging PPI
to CPI inflation was rather mild and gradual … Domestically,
the PBOC should have no urgency to tighten its rate hike cycle
for now, given still benign CPI inflation below the annual
target of around 3%.”
Elsewhere, head of Russia’s financial market lobby group
said this week that Russia could issue OFZ government bonds
denominated in Chinese yuan within two years.
By midday, the global dollar index fell to 90.085
from the previous close of 90.127, while the offshore yuan
was trading at 6.3942 per dollar.