China’s onshore yuan eases after weak CPI data, holds steady offshore

SHANGHAI, Nov 9 (Reuters) – The onshore yuan weakened against the dollar on Thursday after China’s consumer price data suggested soft demand and a fragile economic recovery, increasing the likelihood of further monetary easing.

The yuan’s offshore counterpart held steady. China’s consumer price index (CPI) slipped back into deflationary territory and factory-gate prices kept falling in October, suggesting China’s economic recovery remains fragile due to downward pressures on demand.

Analysts at Citi said the CPI print could increase the chance of further monetary easing by the People’s Bank of China (PBOC) next week. Citi’s economists held onto expectations for another 25-basis-point cut reserve requirement ratio (RRR) cut by the year-end.

Prior to the market’s opening, the PBOC set the daily midpoint rate at 7.1772 per U.S. dollar – the yuan’s firmest level since Sept. 27. The spot yuan opened at 7.2738 per dollar and was changing hands at 7.2833 at midday, 85 pips weaker than the previous late session close and sex pills 1.48% away from the midpoint.

The spot rate is currently allowed to trade with a range 2% above or below the official fixing on any given day. While the onshore yuan weakened, the offshore yuan held steady against a softening dollar. “Implied volatilities of the dollar-offshore yuan pair through the nine-month tenor is plumbing fresh lows of the year amid the PBOC’s effective pegging of the onshore yuan,” Alvin Tan, head of Asia FX strategy at RBC Capital Markets said.

The offshore yuan was trading at 7.2875 per dollar, 10 pips firmer than prior day’s closing. The global dollar index fell to 105.525 from the previous close of 105.593. The yuan market at 0311 GMT: ONSHORE SPOT: Item Current Previous Change PBOC midpoint 7.1772 7.1773 0.00% Spot yuan 7.2833 7.2748 -0.12% Divergence from 1.48% midpoint* Spot change YTD -5.26% Spot change since 2005 13.64% revaluation Key indexes: Item Current Previous Change Thomson 0.0 Reuters/HKEX CNH index Dollar index 105.525 105.593 -0.1 *Divergence of the dollar/yuan exchange rate.

Negative number indicates that spot yuan is trading stronger than the midpoint. The People’s Bank of China (PBOC) allows the exchange rate to rise or fall 2% from official midpoint rate it sets each morning. OFFSHORE CNH MARKET Instrument Current Difference from onshore Offshore spot yuan 7.2875 -0.06% * Offshore 7.0925 1.19% non-deliverable forwards ** *Premium for offshore spot over onshore **Figure reflects difference from PBOC’s official midpoint, since non-deliverable forwards are settled against the midpoint.

. (Reporting by Shanghai Newsroom; Editing by Simon Cameron-Moore)

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