Offshore Yuan Erases Gains as Dollar Rally Hits Asia Currencies

Updated on
  • China central bank earlier boosted fixing most since November
  • 'Market got ahead of itself with dollar weakness'': StanChart

The offshore yuan shrugged off a stronger central bank fixing to decline the most in a month as a resurgent dollar drove declines in Asian currencies.

QuickTake The People’s Currency

The offshore yuan traded in Hong Kong fell 0.3 percent, the most since Feb. 16, to 6.4747 a dollar as of 5:36 p.m. in Hong Kong. It rose 0.18 percent earlier. The onshore currency weakened 0.04 percent to 6.4799, according to China Foreign Exchange Trade System prices, after jumping 0.7 percent on Thursday.

The People’s Bank of China earlier boosted the yuan’s fixing by 0.51 percent to 6.4628 against the greenback. A gauge measuring the dollar’s strength rose for the first time in three days, after sliding 1.1 percent to a five-month low on Thursday. The Bloomberg-JPMorgan Asia Dollar Index fell the most in more than two months on Friday.

"The yuan is paring some of its previous strength, as the market got ahead of itself with the dollar weakness yesterday," said Eddie Cheung, a Hong Kong-based currency strategist at Standard Chartered Plc. "Some of the dollar weakness we are seeing may be transitory. So the yuan can still depreciate if and when dollar strength comes back."

PBOC Comments

The Chinese currency has returned to a more “normal, rational and fundamentals-driven” trend, and the nation doesn’t need to use foreign-exchange policy to boost trade, PBOC Governor Zhou Xiaochuan told reporters on March 12. His deputy, Yi Gang, said in February that the exchange rate will be determined mainly by a basket of currencies. The central bank, soon after it shocked global markets by devaluing the yuan in August, said it was moving to a more market-based system for setting the daily fixing.

The dollar dropped on Thursday after Federal Reserve officials unexpectedly cut their projections for interest-rate increases to two this year from the four they estimated in December. A Bloomberg replica of the CFETS RMB Index, which China uses to measure the yuan’s performance against 13 currencies, fell to 98, the lowest since November 2014.

— With assistance by Tian Chen, and Saijel Kishan

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