China’s Yuan Reverses Early Declines as Dollar Gauge SlumpsBloomberg News
China’s yuan erased early losses to swing to a gain in afternoon trading as a surge in Japan’s yen pushed a gauge of dollar strength lower.
The Chinese currency rose 0.09 percent to 6.6360 a dollar of 6:07 p.m. in Shanghai, according to China Foreign Exchange Trade System prices. The exchange rate in Hong Kong advanced 0.07 percent. A Bloomberg replica of the trade-weighted CFETS RMB Index, which tracks the yuan against 13 currencies, declined 0.1 percent.
The Japanese yen climbed to a three-week high Tuesday as extra spending announced by the government fell short of a headline number flagged by Prime Minister Shinzo Abe. A gauge of the greenback’s strength has dropped 1.5 percent in the past two weeks, making it easier for the People’s Bank of China to steady the yuan as the nation prepares to host the Group of 20 summit in the eastern city of Hangzhou in September. The Chinese currency is slated to enter the International Monetary fund’s Special Drawing Rights in October.
“The yuan strengthened as a rapid gain in the Japanese yen dragged the dollar lower," said Gao Qi, a foreign-exchange strategist at Scotiabank in Singapore. "The yuan will face new bouts of depreciation pressures when the G-20 meeting, SDR and U.S. election are out of the way, as China’s fundamentals are not strong.”
China’s exchange rate has come under pressure from a slowing economy, with the onshore yuan down 2.2 percent for the year amid speculation the central bank favors a decline. The nation’s official manufacturing purchasing managers index signaled contraction for last month. A private factory gauge from Caixin Media and Markit Economics suggested expansion.
The PBOC Tuesday weakened the yuan’s daily fixing against the greenback by 0.26 percent, halting a five-day increase of 0.9 percent. The Bloomberg Dollar Spot index dropped 0.35 percent, after surging 0.33 percent overnight.
— With assistance by Tian Chen