The yuan rose slightly against the dollar but remained near seven-month lows, with the first U.S. presidential debate of 2024 providing little impetus for the market. Supported by firmer central bank guidance, the yuan was 0.01% higher at 7.2678 to the dollar as of 0312 GMT, after trading in a range of 7.2641 to 7.2685. Analysts said the first debate between Democratic U.S. President Joe Biden and his Republican rival Donald Trump had little impact on China markets as there was less China-bashing and discussion of tariffs on Chinese goods than expected. Citi analyst Valery Berenshtein said in a note to clients that the dollar might gradually tick higher against offshore yuan on hints from Trump that he could take a harder stance on China. Offshore yuan traded at 7.2994 yuan per dollar, up about 0.07% in Asian trade.

The yuan also found support amid some unwinding of short positions at the end of the month, according to market participants. That said, the yuan is set to log its sixth straight month decline in June on capital flows into the higher-yielding dollar and amid speculation that China's central bank is not vehemently against its depreciation. Prior to the market opening, the People's Bank of China set the midpoint rate, around which the yuan is allowed to trade in a 2% band, at 7.1268 per dollar, 1,459 pips firmer than a Reuters' estimate. Keiko Kondo, head of multi-Asset investments for Asia at Schroders, said persistently high U.S. interest rates have put Chinese policymakers in a tough position. "They don't want the currency to weaken too much but also because of the weakness of the economy they want to be accommodative," she said. It would be hard for the yuan and other low-yielding Asian currencies to shake off their downward trends in the near-term, she added.

The yuan has lost 2.3% so far this year. It has been under pressure since early 2023, hurt by China's prolonged property sector crisis and anaemic consumer spending. The market's attention is set to turn to data for May's U.S. core personal consumption expenditures (PCE) price index, a key inflation report and the Fed's preferred inflation gauge, which is due later on Friday and could offer clues to the U.S. rate outlook. Spot yuan opened at 7.2680 per dollar and was last trading 11 pips firmer than the previous late session close and was 1.98% weaker than the midpoint. Key onshore vs offshore levels: • Overnight dollar/yuan swap onshore -23.00 pips vs. offshore -23.00 • Three-month SHIBOR 1.9 % vs. 3-month CNH HIBOR 3 % LEVELS AT 03:11 GMT GMT INSTRUMENT CURRENT UP/DOWN(-) % CHANGE DAY'S DAY'S vs USD VS. YR-TO-DA HIGH LOW PREVIOUS TE CLOSE % Spot yuan 7.2678 0.02 -2.28 7.2641 7.2685
Reuters