China’s yuan climbs to 3-year high on stronger guidance

SHANGHAI, May 26 (Reuters) - China's yuan rose on Wednesday,
extending gains to a near three-year high, as the central bank
guided the currency higher and the dollar languished. 
    The People's Bank of China set the midpoint rate
at 6.4099 per dollar prior to market open, 184 pips firmer than
the previous fix of 6.4283 and the strongest such guidance since
June 14, 2018. 
    Spot yuan opened at 6.4062 per dollar, rose past
the psychologically important 6.4000 per dollar level and pushed
as high as 6.3940 per dollar, the strongest since June 2018. 
    It was changing hands at 6.3959 at midday, 161 pips firmer
than the previous late session close.   
    The offshore yuan was trading at 6.3875 per dollar.
    Traders said the strong fixing might indicate regulators
remain tolerant about recent gains.
    "It seems the regulators still insist that the exchange rate
should be determined by the market," said a trader at a Chinese
bank.  
    Analysts said yuan appreciation could help ease China's
imported inflation pressure. 
    In remarks published last week, a central bank official said
China should let the yuan strengthen to help offset the impact
of rising import prices.  
    Beijing has vowed to maintain stability in the country's
commodities markets after prices rallied earlier this year.
  
    "Though it's more of expectations management, rather than
direct intervention by the PBOC, including by purchasing the
yuan to forcibly push the currency higher," said Shen Xinfeng,
chief macroanalyst at Northeast Securities. 
    Shen also attributed the yuan' strength to a weak dollar,
which slid below the key 90 level. 
    The dollar wallowed near its weakest since early January
against major peers on Wednesday, as Treasury yields eased amid
Federal Reserve insistence that stimulus will continue despite
current inflationary pressures. 
    U.S. Federal Reserve policymakers have begun to acknowledge
they are closer to debating when to pull back some of their
crisis support for the U.S. economy, even as they say it is
still needed to bolster the recovery and employment.
 
    The Thomson Reuters/HKEX Global CNH index, which
tracks the offshore yuan against a basket of currencies on a
daily basis, stood at 97.59, firmer than Tuesday's 97.58. 
    The global dollar index fell to 89.624 from the
previous close of 89.699. 
    Offshore one-year non-deliverable forwards contracts
(NDFs), considered the best available proxy for
forward-looking market expectations of the yuan's value, traded
at 6.5517, 2.16 percent away from the midpoint.

    The yuan market at 4:07 GMT: 
    
    ONSHORE SPOT:
 Item               Current  Previous  Change
 PBOC midpoint      6.4099   6.4283    0.29%
                                       
 Spot yuan          6.3959   6.412     0.25%
                                       
 Divergence from    -0.22%             
 midpoint*                             
 Spot change YTD                       2.07%
 Spot change since 2005                29.40%
 revaluation                           
 
    Key indexes:
     
 Item            Current     Previous  Change
                                       
 Thomson         97.59       97.58     0.0
 Reuters/HKEX                          
 CNH index                             
 Dollar index    89.624      89.699    -0.1
 
*Divergence of the dollar/yuan exchange rate. Negative number
indicates that spot yuan is trading stronger than the midpoint.
The People's Bank of China (PBOC) allows the exchange rate to
rise or fall 2% from official midpoint rate it sets each
morning.

    OFFSHORE CNH MARKET   
  
 Instrument            Current   Difference
                                 from onshore
 Offshore spot yuan    6.3875    0.13%
        *                        
 Offshore              6.5517    -2.16%
 non-deliverable                 
 forwards                        
               **                
 
*Premium for offshore spot over onshore
**Figure reflects difference from PBOC's official midpoint,
since non-deliverable forwards are settled against the midpoint.
. 



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