China’s yuan set for 3rd straight day of gains

Source:Reuters-Global Times Published: 2017/8/9 17:48:40

Geopolitical tensions may pile more pressure on the greenback

China's yuan firmed against the US dollar on Wednesday, setting it up for a third straight day of gains on the back of a stronger fixing and continued corporate dollar selling.

Prior to market opening, the People's Bank of China set the yuan midpoint at 6.7075 per dollar, the strongest level since October 10, 2016.

But this reflects strength in the Chinese currency rather than US dollar weakness, traders said.

Wednesday's official guidance was 109 pips or 0.16 percent firmer than the previous fix at 6.7184 per dollar.

Market players attributed the firmer fixing to gains in the spot yuan a day earlier.

The spot yuan climbed to new 10-month highs on Wednesday.

It opened at 6.7070 per dollar and was changing hands at 6.6929 at midday, 151 pips firmer than the previous late session close.

The offshore yuan was around 6.69 per dollar during the afternoon trading. And the onshore yuan was also hovering at 6.68 per dollar.

Companies with dollar positions turned cautious as the yuan strengthened firmer than 6.7 per dollar. They dumped dollars to reduce exchange losses which pushed the spot rate higher, which also happened on Tuesday, a trader at a Chinese bank said.

Geopolitical tensions may pile more pressure on the greenback, traders said.

North Korea said on Wednesday it is "carefully examining" plans for a missile strike on the US Pacific territory of Guam, just hours after US President Donald Trump warned North Korea that any threat to the US would be met with "fire and fury."

The market was little affected by China's inflation data for July released on Wednesday. Chinese annual producer price inflation held steady in July, with prices for key raw materials up slightly on expectations of deeper capacity cuts going into the winter months of heavy pollution, while consumer inflation slowed slightly.

The global dollar index,  which measures the value of the currency against a basket of six major currencies, changed around 93.55, compared with the previous close of 93.65.

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