Beleggen/investeren in de Chinese Yuan

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China's yuan may slip further to aid economic recovery

SHANGHAI/SINGAPORE (June 2): China's yuan has skidded to six-month lows against the dollar and analysts say it could weaken further as investors fret over a bumpy pandemic recovery in the world's second-largest economy.

Disappointing economic data, widening yield differentials with the US, upcoming corporate dividend payments and continued capital outflows through foreign selling of stocks and bonds have combined to drag the currency down to levels last seen in November.

The yuan has depreciated more than 5% against the surging dollar since the highs hit in January, when global markets embraced China's border reopening, and is one of the worst performing Asian currencies this year. It last traded at 7.0585 per dollar on Friday (June 2).

"The yuan suffers as China's reopening story is less appealing than before, and there is no sign of further stimulus," said Gary Ng, a senior economist for Asia-Pacific at Natixis.

"A weaker currency at the current juncture can help export performance, especially as global trade is shrinking this year."

Exports have been one of the few bright spots for the Chinese economy over the past few years but new orders have been falling in recent months amid softening global demand.

Sources told Reuters that the Commerce Ministry has asked exporters, importers and banks recently about their currency strategies and how a weakening yuan could affect their businesses.

To be sure, the central bank has ample policy tools to prevent excess currency movements. The People's Bank of China (PBOC) said last month that it will resolutely curb large fluctuations in the exchange rate and study the strengthening of self-regulation of dollar deposits.

"Expectations of financial institutions, enterprises and residents on the exchange rate are generally stable, which is a solid foundation and strong guarantee for the smooth operation of the foreign exchange (forex) market," the central bank said in the statement.

However, despite the yuan's quickening tumble over the past month, traders have only reported a few occasions when state banks have been suspected of stepping in to support the currency.

The PBOC did not immediately respond to Reuters request for comments.

"The PBOC essentially appears content to let the rising US dollar buoy USD/CNY higher, amid China's fading growth momentum," said Alvin Tan, the head of Asian forex strategy at RBC Capital Markets.

"After all, currency depreciation is a form of monetary easing," Tan said, maintaining his forecasts for the yuan to trade at 7.1 at the end of the third quarter before finishing the year at 7.05.

Tommy Wu, a senior China economist at Commerzbank, also said the central bank "appears to tolerate a weaker yuan", noting its recent daily official yuan midpoint guidance rates have all came in line with market expectations.

Still, economists and analysts don't expect sharp falls from here on. Among half of a dozen of global investment houses surveyed by Reuters this week, all said they don't foresee the yuan weakening beyond 7.3 this year, the lows hit in 2022 as strict anti-virus curbs battered the economy.

"A weaker yuan helps exporters when they convert the dollar receivables to yuan," said Barclays forex strategist Lemon Zhang. "But a weak currency expectation going forward is not helping capital flows, as investors are concerned about forex losses when they look at yuan-denominated assets."

A weaker yuan might also temper deflationary pressures being seen in parts of the economy due to weak domestic demand.

However, implied volatility for the currency, an options market gauge of future volatility, has been fairly stable. The one-month tenor stood at 4.5, the highest since April. And six-month yuan traded in forwards market was priced at 6.96 per dollar.

Some market watchers suspect the PBOC could set a cap on dollar deposit rates, a move that could encourage companies to liquidate their large dollar positions to ease downside pressure on the yuan.

"Chinese officials will not step in unless the spot yuan weakens quickly through 7.2," said Serena Zhou, a senior China economist at Mizuho Securities.

"Note that the PBOC has not intervened with any of its policy tools, such as the 'counter-cyclical factor' in pricing the yuan fixing rate or forex risk reserve ratio, to shore up the yuan."

https://theedgemalaysia.com/node/669768
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China's yuan nearing 2007 levels

Yahoo Finance

The Chinese Yuan is nearing its lowest level since 2007.

The People's Bank of China has been taking steps to try to keep the currency stable while simultaneously lowering borrowing costs in a bid to boost the economy.

Yahoo Finance Reporter Ines Ferre breaks down the story.

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China ramps up yuan internationalisation under Belt and Road Initiative

SHANGHAI/SINGAPORE (Oct 19): China is using loans agreed through its Belt and Road Initiative (BRI) to promote the yuan internationally, having already boosted the yuan's share of global payments to record levels.

During the Belt and Road Forum in Beijing that ended on Wednesday, China's policy banks signed a series of yuan-denominated loan contracts with foreign lenders.

Many of the 130 countries that attended the forum belonged to the Global South, while most Western nations stayed away, and the presence of Russia's President Vladimir Putin lent support to Chinese President Xi Jinping's ambition for a new, multi-polar world order.

"You can see that the countries that are basically using the RMB for trade settlements are mostly countries that have visited Beijing or have come up with strategic agreements with Beijing, Russia being the most obvious one," said Alicia Garcia Herrero, the Asia-Pacific chief economist at Natixis.

Geostrategic tensions and high US interest rates have helped Beijing increase the yuan's acceptability with some countries.

In September, the yuan — also called the RMB — accounted for 3.71% of global payments by value, hitting a record high, and almost doubling from 1.91% in January, according to SWIFT data released on Wednesday.

Rising Sino-US competition and the Russia-Ukraine war, both pushed Beijing to persuade more countries to use yuan for settlement, despite the currency's depreciation against the dollar.

And funding BRI projects has helped China revitalise the once-stalled process of yuan internationalisation. It is 10 years since Xi launched his signature BRI strategy, aimed at building global infrastructure and energy networks connecting Asia with Africa and Europe.

"Amid rising currency volatility globally, the BRI provides a good opportunity to expand the RMB's international clout," China International Capital Corp (CICC) wrote.

The China Development Bank, a state policy lender, signed yuan-denominated loan contracts with Malaysia's Maybank, Egypt's central bank, and BBVA Peru to support BRI projects.

Another policy bank, the Export-Import Bank of China, signed a yuan-based loan agreement with Saudi National Bank, while Bank of China helped Egypt issue Africa's first yuan-denominated Panda bonds.

Beijing also allocated an additional 80 billion yuan to its Silk Road Fund for BRI projects.

A major driving force behind the rise in yuan financing has been the sharp increase in US interest rates.

As a result of the "increasingly high borrowing cost of the dollar...many debtors have turned to the RMB for financing or refinancing", Natixis economist Haoxin Mu said, while also citing "the weaponisation of the dollar" in the wake of the Ukraine war as a factor behind the increased use of the yuan.

https://theedgemalaysia.com/node/686905
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Yuan Trading in Russian FX Market Again Grows to Record in March

(Bloomberg) -- The share of yuan trading on Russia’s foreign exchange market reached a new high in March as its importance in the country’s economy continues to grow.

The turnover of exchange-traded yuan amounted to 53%, while its share in over-the-counter trading also set a record of 39.6%, according to the Bank of Russia’s financial risk review for March.

After Russia’s February 2022 invasion of Ukraine and the subsequent sanctions imposed by the US and its allies, Moscow sought to rapidly reduce the role of dollars and euros in its economy as it redirected trade toward Asia and away from Europe.

The share of what Russia calls “toxic” currencies, which includes the dollar and the euro, fell to 46.4% on the exchange from 52.8% in February, the central bank said. In the over-the-counter segment, the share of “toxic” currencies decreased to 54.7% from 59.8% in February.

Russia is creating the conditions for settlement in various national currencies, Governor Elvira Nabiullina said Monday in a speech to parliament. Over the past year, the share of settlements in currencies other than the dollar or euro have increased from 39% to 67%.

Payments are basically now made in rubles and yuan, she said. “The share of the dollar and the euro has practically halved,” she said.

https://finance.yahoo.com/news/yuan-tra ... 54905.html



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China sets yuan fixing with strongest upward bias since 2018

HONG KONG (April 11): China's central bank ramped up support for the yuan in its daily guidance on Thursday after an overnight surge in the US dollar put authorities on alert for sharp declines in the local currency.

The People's Bank of China (PBOC) set the midpoint rate for the yuan at 7.0968 per US dollar prior to market open on Thursday, 1,654 pips firmer than a Reuters estimate, the biggest discrepancy since Reuters started its estimations in 2018.

The record discrepancy comes after the offshore yuan dropped the most in three weeks overnight.

The yuan has come under intense pressure recently from a strengthening dollar and the wide gap between US and Chinese interest rates.

The dollar rose across the board on Wednesday after data showed US inflation sped up more than forecast in March, pushing out the expected timing of a Federal Reserve (Fed) rate cut to September from June.

"The latest weakness of the yuan is mostly due to a stronger dollar rather than domestic developments," said Lynn Song, chief economist for Greater China at ING.

He expects the PBOC to continue to resist rapid yuan depreciation although the yuan is likely to gradually weaken in the near-term.

The spot yuan opened at 7.2370 per dollar and was changing hands at 7.2355 at 0225 GMT, 10 pips away from the previous late session close and 1.95% away from the midpoint.

The spot rate is currently allowed to trade within a 2% range above or below the official fixing on any given day.

https://theedgemalaysia.com/node/707637
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China allows yuan to drop as outflows, dollar test PBOC’s grip

(May 23): China signalled its permission for the yuan to weaken against the dollar, as a jump in capital outflows and a resilient greenback pressured the central bank into loosening its grip.

The People’s Bank of China weakened its daily reference rate for the yuan to a level unseen since January. The move came as the currency slid in the spot market this week amid signs investors are avoiding yuan-denominated assets for higher-yielding ones and bets the dollar will stay strong.

The PBOC’s tweaks to the so-called fixing — though moderate so far — may carry an important clue for the market, as it shows Beijing may be ready to end a pattern of supporting the yuan by holding the reference rate largely steady. Such a move would have a far-reaching impact as the Chinese currency is seen as an anchor of stability for its regional peers.

“With the dollar strength likely to last a tad longer, the PBOC could be allowing a tad more headroom for dollar-yuan to rise,” said Fiona Lim, senior strategist at Malayan Banking Bhd. However, the fixing is still stronger than estimates, which conveys the PBOC’s desire to limit the yuan’s weakness, she said.

For most of this year, Chinese authorities have maintained a strong hold on the yuan as a weak economy and the nation’s wide interest-rate gap with the US favour the dollar. Worsening capital outflows, seen in a surge in local firms’ purchase of foreign exchange and exporters’ hoarding of the dollar, have also weighed on the currency.

The PBOC has been facing a constant battle to find the optimal pace of yuan weakness that’s conducive for growth, without triggering market panic or capital outflows. Former Chinese officials said last week the nation should relax its control over the yuan as the current focus on keeping the currency stable has limited the scope for possible monetary stimulus.

On Thursday, the PBOC cut the fixing to 7.1098 per dollar. The yuan was little changed in onshore and overseas markets.

The dollar edged lower after an advance on Wednesday, when traders slashed bets for a rate cut after minutes from the Federal Reserve showed some officials questioning whether the policy was restrictive enough.

“The weaker fix is in line with the recovery in the dollar,” said Khoon Goh, head of Asia research at ANZ Group Holdings Ltd. “This is a continuation of allowing the yuan to be more flexible.”

https://theedgemalaysia.com/node/712649
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Saudis join intl digital currency project

(June 10): Saudi Arabia has joined Project mBridge, which experts said will add resilience to global trade by facilitating renminbi settlement for bulk commodities trade.

The mBridge project has now reached the minimum viable product stage, China Daily reported.

Project mBridge resulted from collaboration starting in 2021 between the Bank for International Settlements' innovation arm, the Bank of Thailand, the Central Bank of the United Arab Emirates, the Digital Currency Institute of the People's Bank of China, and the Hong Kong Monetary Authority, said China Daily.

"In addition, using digital renminbi settlement can help Saudi Arabia avoid risks caused by fluctuations in the US dollar exchange rate and ensure the stability of trade returns," said Zhan Junhao, founder of Fujian Huace Brand Positioning Consulting, it noted.

https://theedgemalaysia.com/node/714921



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China's yuan eases to seven-month low after much weaker central bank guidance

SHANGHAI (June 20): China's yuan fell to a fresh seven-month low against the dollar on Thursday, after the central bank set much weaker official guidance, while the Chinese currency hit the weaker end of its trading band in cash settlement transactions.

Prior to the market's opening, the People's Bank of China (PBOC) set the midpoint rate, around which the yuan is allowed to trade in a 2% band, at 7.1192 per US dollar. That was the weakest since November 2023 and the largest one-day move since April 16.

The PBOC has to "passively" set the yuan midpoint weaker to avoid the tomorrow-next trades from hitting the lower side of the trading band at market opening, said Xing Zhaopeng, senior China strategist at ANZ.

The yuan hit the weak end of the band in cash settlement transactions on Thursday, traders said.

"Lacking liquidity will affect market expectations," Xing said, adding the central bank will continue to allow the yuan to drift weaker in an orderly manner.

The spot yuan dropped to 7.2605 in early trade, the weakest since November 2023 and only 11 pips from the lower end of the daily trading band. It was changing hands at 7.2602 by midday, 30 pips weaker than the previous late session close and 1.98% away from the midpoint.

It is insufficient to conclude that Thursday's fixing signals an immediate change in the PBOC's FX policy stance but there are signs it may be slightly relaxing the lower bound of the daily yuan trading band against the dollar, said Becky Liu, head of China macro strategy at Standard Chartered.

Earlier on Thursday, China left benchmark lending rates unchanged at a monthly fixing, matching market expectations and underscoring Beijing's monetary easing efforts continue to be constrained by a weak yuan.

The currency is down 2.2% this year, pressured by its relative low yields versus other currencies and a struggling property sector.

The spot yuan opened at 7.2580 per dollar and was changing hands at 7.2602 at midday, 30 pips weaker than the previous late session close and 1.98% away from the midpoint.

The global dollar index rose to 105.287 from the previous close of 105.254.

The offshore yuan was trading 231 pips weaker than the onshore spot at 7.2833 per dollar.

https://theedgemalaysia.com/node/716067
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Russia’s foreign exchange trading is now almost 100% in yuan

(July 10): The share of yuan on Russia’s foreign exchange market has reached 99.6% after sanctions forced the Moscow Exchange to halt trading in US dollars and the euro.

While yuan accounted for only 53.6% of Russia’s exchange trading volume in May, the latest sanctions introduced by the US in mid-June forced it to halt trading in dollars and euros.

Without those currencies, the average daily volume of exchange FX trading shrunk by almost a third to 282 billion rubles (RM15.07 billion) in the second half of June, according to Bank of Russia’s June financial risk review.

The US dollar and the euro are still traded on the over-the-counter market, where turnover in June slightly declined to 13 trillion rubles while the yuan share gained 0.8pp to 40%.

Sales by major exporters remained high and amounted to US$14.6 billion (RM68.73 billion) last month.

Uploaded by Felyx Teoh

https://theedgemalaysia.com/node/718383
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