HONG KONG, July 24: The Chinese yuan steadied at a one-week high against the US dollar on Wednesday following a stronger daily fixing, but weak manufacturing data and tighter money market conditions checked gains.
By midday, the spot currency was trading at 6.1367 per dollar, slightly above Tuesday’s close of 6.1374.
Activity in China’s vast manufacturing sector slowed to an 11-month low in July as new orders faltered and the job market weakened, a preliminary survey showed on Wednesday, suggesting the world’s second-largest economy was still losing momentum.
The effects of the weak data rippled across Asian stock markets and punctured the early signs of a rally in Chinese stocks on Tuesday, weighing on the currency.
Increasing tightness in the money markets as evident from an uptick in its benchmark seven-day bond repurchase agreement and a higher cutoff yield at a bond auction also kept the yuan’s gains in check. [ID: nB9N0EH01U]
But while expectations of renminbi weakness have grown amid recent evidence of capital outflows, a series of strong fixings by China’s central bank have kept onshore markets hemmed in a narrow channel.
On Wednesday, the PBOC fixed the daily yuan midpoint stronger versus the U.S. Dollar for a third consecutive day at 6.1695.
‘The market is still divided on whether the yuan will appreciate or depreciate for the rest of the year, making trading ranges narrow between 6.12 and 6.14 recently,’ said a currency trader in Shanghai.
In the currency forwards market, one-month and one-year rates stabilised after edging higher for the past two days, indicating the bulk of the dividend payments by local banks may be over.
(AGENCIES)
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