China Yuan Down on Dollar Strength

 
   By Esther Fung 
 
                                  Vs Parity  Previous 
USD/CNY Central Parity   6.1384               6.1330 
USD/CNY OTC 0830 GMT     6.2598     1.98%     6.2551 
            High         6.2605     1.99% 
            Low          6.2570     1.93% 
 

        SHANGHAI--China's yuan fell against the U.S. dollar Wednesday, its first day of onshore trading after the week-long Lunar New Year break, tracking cues from the daily reference rate set by the central bank. An improvement in preliminary manufacturing data for February failed to significant offset yuan weakness.
        On the over-the-counter market, the dollar was at CNY6.2598 around 0830 GMT, higher than the Feb. 17 close of CNY6.2551. It traded in a range of CNY6.2570 to CNY6.2605.
        The People's Bank of China set the dollar/yuan central parity rate at 6.1384, higher than Feb. 17's 6.1330, following dollar strength overseas during the weeklong break. While the yuan has slid against the dollar, it is largely reflective of the strong dollar rather than yuan weakness, traders said.
        China's slowing economy and capital flight out of the country had contributed to yuan weakness. The preliminary HSBC China Manufacturing Purchasing Managers' Index, a gauge of nationwide manufacturing activity, showed some improvement in February, but didn't move the needle for the yuan significantly.
        The preliminary HSBC PMI rose to 50.1 in February compared with a final reading of 49.7 in January, HSBC Holdings PLC said Wednesday.
        A reading below 50 indicates a contraction in manufacturing activity from the previous month, whereas a reading above indicates expansion.
        The yuan has fallen 0.9% since the start of 2015. In the whole of 2014, the yuan fell 2.5% against the dollar, due to slowing domestic growth and strength in the U.S. economy which sent its dollar higher. It was the first time the Chinese currency recorded an annual loss since 2010.
        The PBOC has been keeping the central parity steady, supporting the yuan which has been persistently hugging the weak side of the currency band.
        Offshore, one-year dollar/yuan nondeliverable forward contracts rose to 6.3875 from 6.3820 late Tuesday, implying a 2.0% fall by the yuan over the next year.
        In the offshore yuan market in Hong Kong, where the Chinese currency floats freely, the dollar was at CNY6.2714 late Wednesday, higher than CNY6.2617 late Tuesday.
        Write to Esther Fung at esther.fung@wsj.com
        (END) Dow Jones Newswires

        February 25, 2015 04:42 ET (09:42 GMT)

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