China Yuan Weakens on Expectations for Further Monetary Easing

 
   By Esther Fung 
 
                                  Vs Parity  Previous 
USD/CNY Central Parity   6.1273               6.1288 
USD/CNY OTC 0830 GMT     6.2485     1.98%     6.2405 
            High         6.2496     1.99% 
            Low          6.2415     1.86% 
 

        SHANGHAI--China's yuan fell against the U.S. dollar Monday on expectations for further monetary easing after the latest weak credit data for January.
        On the over-the-counter market, the dollar was at 6.2485 around 0830 GMT, higher than Friday's close of CNY6.2405. It traded in a range of CNY6.2415 to CNY6.2496.
        The People's Bank of China set the dollar/yuan central parity rate at 6.1273, lower than Friday's 6.1288 following dollar weakness overseas.
        On Friday, the PBOC reported that overall credit--as measured by what is called total social financing--was weak compared with a year ago. The growth in broad money supply for the month was also at a record low and well below expectations.
        "The offshore dollar fell over the weekend and that's the reason for the lower parity, but the onshore spot market is taking its cues from the CNH," said a Shanghai-based local bank trader.
        In the offshore yuan market in Hong Kong, where the Chinese currency floats freely, the dollar was at CNY6.2682 late Monday, higher than CNY6.2435 late Friday.
        The yuan has fallen 0.7% since the start of 2015. The falling yuan has reflected weakened growth prospects in China and the eurozone, and the U.S. Federal Reserve's withdrawal from its quantitative-easing policy last year, which prompted capital outflows from China.
        "Our recent conversations with clients show a widening gap between the onshore and offshore perception," said Nomura analysts in a note. "Onshore investors are far more convinced of China's medium-term structural viability given continued anti-corruption and legal reforms, and rising grass root innovations and entrepreneurship. Among offshore investors, hardened Chinese bulls remain a minority."
        China's foreign-exchange regulator warned Sunday that the country might face more volatility in cross-border capital movements this year, and that its foreign-exchange rate could be fixed over short periods to deal with emergencies. The rate wouldn't be fixed over longer periods to prevent distortions to the market, the regulator added.
        Offshore, one-year dollar/yuan nondeliverable forward contracts rose to 6.3855 from 6.3635 late Friday, implying a 2.2% fall by the yuan over the next year.
        Write to Esther Fung at esther.fung@wsj.com
        (END) Dow Jones Newswires

        February 16, 2015 04:45 ET (09:45 GMT)

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