Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Yuan’s Gains May Be Capped After PBOC Cuts Shorting Costs

ForexOct 11, 2020 01:27PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. Yuan’s Gains May Be Capped After PBOC Cuts Shorting Costs

(Bloomberg) -- The yuan may come under pressure in early Monday trade, dragging Asian counterparts lower with it, after authorities made it easier to bet against the currency’s gains.

Financial institutions will no longer need to set aside cash when purchasing foreign exchange for clients through currency forwards, effective Monday, the People’s Bank of China said Saturday. The measure comes in the wake of Friday’s 1.4% surge in the yuan, its biggest advance in more than 13 years, and makes the central bank’s daily currency fixing a key focus when markets open.

This “may be an attempt to moderate the yuan’s increase,” Marc Chandler, chief market strategist at Bannockburn Global in New York, wrote in a report Sunday. “When the PBOC last did this, in September 2017, the yuan fell around 2.5% in the following few weeks.”

A similar move now would bring the onshore yuan toward 6.8650 per dollar, Chandler said. The currency closed on Friday at about 6.6930 per dollar, its strongest level since April 2019.

The central bank’s latest move comes against the backdrop of a slide in the dollar that’s been fueled by unprecedented U.S. stimulus efforts to counter the fallout from the Covid-19 pandemic. The yuan has just had its best quarter in 12 years versus the U.S. currency, appreciating more than 4%.

Banks previously had to hold 20% of sales on some foreign-exchange forward contracts, a rule imposed two years ago when the currency slumped toward 7 per dollar.

As well as the result of the fixing, the yuan’s move on Monday will also depend on the extent of official intervention to amplify the apparent message from authorities to calm the yuan’s strength.

On the three previous occasions when the rule was changed, it was accompanied by a miss or a change in the fixing rate, although this varied from 0.1% to 0.5%, according to a Bloomberg study. The onshore yuan moved by an average of 0.5% within 24 hours of the rule change and was roughly sustained a week after the rule change.

©2020 Bloomberg L.P.

Yuan’s Gains May Be Capped After PBOC Cuts Shorting Costs
 

Related Articles

Dollar Edges Lower Ahead of Fed Meeting; Yuan Weakens
Dollar Edges Lower Ahead of Fed Meeting; Yuan Weakens By Investing.com - Sep 21, 2021

By Peter Nurse Investing.com - The dollar edged lower in early European trade Tuesday, slipping from a month high, ahead of the start of this week’s crucial Federal Reserve...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email