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PBOC increases offshore yuan bills issuance to stabilize currency

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PBOC increases offshore yuan bills issuance to stabilize currency
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The People’s Bank of China (PBOC) plans to issue a larger batch of bills in an effort to stabilize the weakening yuan, according to state media Financial News on Thursday. This move follows the central bank’s announcement of ramping up bill sales in Hong Kong next week.

The PBOC intends to sell CNY 15 billion (HK$16 billion) worth of six-month yuan-denominated bills next Tuesday, marking the largest auction for such a tenor since it began selling offshore yuan bills in 2018. This sale significantly surpasses the CNY 5 billion of six-month bills set to expire next week.

The decision to sell bills in the financial hub is expected to drain yuan liquidity from the market and help stabilize the currency’s exchange rate. This comes after the yuan’s three-month interbank rate in Hong Kong rose to 4.23%, and the one-month tenor climbed to 4.79%. The overnight rate exceeded 5% for the first time since April 2022, moving closer to the comparable borrowing costs for the US dollar.

As a result, traders will find it more expensive to borrow Chinese currency in overseas markets and sell it against the US dollar. The has risen 46 basis points this week, reaching a new high of 7.2789 per US dollar.

In addition to these measures, early mortgage repayments have been reduced, a move cited by an unnamed senior official as a potential booster for consumer confidence. The PBOC plans to increase its coordination with fiscal and industrial policies while closely monitoring the effects of financial policies.

This marks the second batch of offshore Chinese yuan notes issued by PBOC in the past month with an aim to stabilize the Chinese yuan. On August 22, PBOC had announced issuing CNY 35 billion worth of central government bills in Hong Kong, with CNY 20 billion of them being three-month notes. This year, the central bank has issued nine batches of bills in Hong Kong totaling CNY 110 billion ($15.1 billion).

The larger issuance of central government bills is expected to moderately tighten the Chinese yuan liquidity in the offshore market and increase the cost of shorting the yuan. The offshore yuan Hibor, a gauge that measures offshore yuan liquidity conditions, had risen 51 basis points to 4.44% on September 12, the highest since April 2022. The three-month offshore yuan Hibor rose 24 basis points to 4.11%, the highest since 2018.

The PBOC’s issuance of offshore central notes and tightening of the yuan liquidity are intended to stabilize the exchange rate and avoid irrational fluctuations in the market. If there continues to be depreciation pressure on the offshore Chinese yuan exchange rate in the future, PBOC may further regulate the offshore yuan liquidity by issuing additional central bills.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Forex

Dollar steadies ahead of Powell’s speech; euro edges higher

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Investing.com – The U.S. dollar stabilized in early European trade Monday, handing back some of the gains seen after the attempted assassination of former U.S. President Donald Trump over the weekend, ahead of comments from Fed Chair Jerome Powell.

At 05:45 ET (09:45 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded largely unchanged at 103.785, after hitting a one-month low last week. 

Dollar stabilizes ahead of Powell speech

The dollar, and the benchmark , initially gained after Trump’s right ear was hit, leaving his face blooded, after shots rang out at a campaign rally in Pennsylvania over the weekend.

Trump is now set to appear at the 2024 Republican convention later this week, and is likely to be nominated as the party’s frontrunner for the presidential race.

Analysts said that the shooting increased his chances of a victory over Joe Biden- a scenario that could eventually favor the dollar, given that Trump has signaled his intent to enact more protectionist trade policies. 

However, these gains have dissipated ahead of comments from Federal Reserve Chair Jerome Powell, as he is set to be interviewed by David Rubenstein at the Economic Club of Washington DC.

U.S. inflation showed signs of easing last week, and Powell could advance expectations that the central bank will start a rate-cutting cycle in September.

“Fed speakers will have to comment on the latest CPI figures, and when compared to the June Dot Plot, there are clear risks of dovish readjustments in many FOMC members’ communication,” said analysts at ING, in a note.

Euro gains ahead of ECB meeting

rose 0.1% to 1.0910, with the euro trading at its highest level since March, ahead of the latest policy-setting European Central Bank meeting later this week.

The ECB is widely expected to maintain its current rates after they eased in June.

“The softer dollar story has boosted EUR/USD in July – but we still think the volatile situation in French politics is a risk that cannot be ignored, and point at least to the euro lagging most other pro-cyclical currencies in any new USD selloffs,” said ING.

Credit rating agencies Moody’s (NYSE:) and S&P Global have warned of negative impacts on the French economy from the political deadlock, where no political party won an outright majority at the recent parliamentary elections.

traded marginally lower to 1.2988, trading around the highest levels seen in over 2 years, in the wake of the landslide election victory for Britain’s center-left Labour government, with investors starting to look at U.K. markets as a potential haven as political uncertainty rises in the U.S. and elsewhere in Europe.

Yuan slipped after weak Chinese GDP data 

In Asia, traded 0.1% higher to 157.96, with the yen slipping slightly after it had firmed sharply against the dollar late last week, sparking speculation over whether the move was caused by government intervention or by a short squeeze on bets against the yen.

traded 0.2% higher to 7.2627, with the Chinese currency weakening close to eight-month lows after China’s economy grew less than expected at 4.7% in the second quarter, amid increasing headwinds from weak consumer spending. 

 

 

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Dollar strengthens after Trump shooting; Asia FX weakens

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Investing.com– Most Asian currencies moved little on Monday, while the dollar caught some safe haven bids after the attempted assassination of former U.S. President Donald Trump over the weekend. 

Regional trading volumes were muted on account of a Japanese market holiday. The yen weakened slightly against the dollar, keeping markets on edge over any potential government intervention.

Asian currencies had advanced sharply against the dollar last week amid increased optimism over interest rate cuts by the Federal Reserve. While the dollar retook some ground on Monday, it was nursing steep losses over the past two weeks. 

Weak gross domestic product data from China somewhat dented sentiment towards Asian markets, while the yuan also weakened after the reading. 

Dollar firms as Trump assassination attempt favors safe havens 

The and both rose 0.1% in Asian trade, recovering from an over one-month low hit last week. 

The greenback caught some bids after a shooting at a Trump rally in Pennsylvania, where the former President shot in the ear. But Trump was seen urging his supporters to “fight!” after the shooting.

Trump is now set to appear at the 2024 Republican convention later this week, and is likely to be nominated as the party’s frontrunner for the presidential race.

Analysts said that the shooting increased his chances of a victory over Joe Biden- a scenario that could eventually favor the dollar, given that Trump has signaled his intent to enact more protectionist trade policies. 

The dollar is also set to take more cues from an address by later this week.

Japanese yen flat, intervention in focus 

The Japanese yen steadied in thin trade on Monday, with the pair hovering around the 158 yen level.

The yen had firmed sharply against the dollar late last week, sparking speculation over whether the move was caused by government intervention or by a short squeeze on bets against the yen. The yen also recovered from its weakest level in 38 years.

But despite a recent recovery, the yen was still nursing steep losses against the dollar over the past two years.

Chinese yuan slips on weak Q2 GDP 

The Chinese yuan weakened on Monday, with the pair falling 0.2% and coming close to eight-month highs.

China’s economy grew less than expected at 4.7% in the second quarter, data showed, amid increasing headwinds from weak consumer spending. 

The reading ramped up concerns over a slowing economic recovery in the country, especially as it grapples with slowing consumer spending. 

Broader Asian currencies mostly weakened on Monday. The Australian dollar’s pair fell 0.1%, while the South Korean won’s pair rose 0.7%.

The Singapore dollar’s pair rose 0.1%, while the Indian rupee’s pair remained close to record highs. 

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Dollar hovers around 1-mth low as soft CPI data spurs rate cut bets

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Investing.com– The dollar steadied against a basket of currencies on Friday after softer-than-expected inflation data saw the greenback sink to one-month lows, amid increased bets that the Federal Reserve will cut interest rates in September.

Broader foreign exchange markets were somewhat cautious amid volatility in the Japanese yen. The Japanese currency strengthened sharply on late-Thursday, which sparked speculation over whether the Japanese government had intervened in currency markets.

The euro moved little against the dollar German inflation data read slightly weaker than expected for June. The pair steadied after surging to an over one-month high against the dollar on Thursday.

The British pound was also flat, with the pair moving little after rallying to a near one-year high against the dollar on Thursday. The pound was also buoyed by data on Thursday which showed the British in May.

Dollar near 1-mth low as soft CPI spurs rate cut bets 

The and steadied on Friday after tumbling to a one-month low in overnight trade.

The greenback was battered by softer-than-expected data, which showed inflation cooled a smidge more than expected in June. 

The reading ramped up bets that the Federal Reserve will have more confidence to begin cutting interest rates.

Traders were seen pricing in a 83.4% chance the Fed will cut rates in September, compared to a 64.7% chance seen last week, according to .

Japanese yen volatile after USDJPY tumbles from 161; intervention in focus 

The Japanese yen was volatile in Friday trade, with the pair rising 0.2% to about 159.18 yen.

The pair slid over 2% on Thursday after the soft U.S. CPI report, dropping from levels close to a 38-year high, which it had hit earlier in July.

But the sharp drop in the yen sparked questions over whether the Japanese government was actively intervening in currency markets. Officials gave scant cues on the matter, even after offering a string of warnings in recent weeks over betting aggressively against the yen.

Data on the Bank of Japan’s balance sheet, due later in July, is expected to offer more clarity on whether the government did intervene. Traders also speculated whether short positions on the yen were squeezed by a sharp decline in the dollar, following the weak CPI reading for June. 

 

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