Yuan looks set for first weekly gain since mid-Jan as recovery gains traction

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SHANGHAI — China’s yuan inched higher

against an easing dollar on Friday and looked set for the first

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weekly gain since mid-January, underpinned by expectations

Beijing will set an ambitious growth target for this year.

Sources involved in policy discussion told Reuters that

China is becoming increasingly ambitious with its 2023 growth

target, aiming potentially as high as 6%, in a bid to boost

investor and consumer confidence and build on a promising

post-pandemic recovery.

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Currency traders said the 6% target was at the upper end of

market expectations ranging from 5% to 6%, suggesting that the

authorities were very confident of a strong economic rebound

this year. Recent data shows activity is bouncing back at a

better-than-expected pace.

“The economic targets that Beijing will unveil at the Two

Sessions in early March will likely illustrate the government’s

resolve to deliver a strong recovery in domestic demand,” said

Eugenia Victorino, head of Asia strategy at SEB.

“This should provide a yet another boost to the yuan. We

hold on to our view that USD/CNY will trade towards 6.60 by

end-2023.”

On Sunday, Premier Li Keqiang is due to deliver the 2023

government work report to the annual parliamentary session,

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which will include key economic goals and policy priorities.

Prior to the market opening, the People’s Bank of China

(PBOC) set the yuan midpoint rate at 6.9117 per

dollar, 309 pips or 0.45% weaker than the previous fix of

6.8808.

In the spot market, the onshore yuan opened at

6.8940 per dollar and was changing hands at 6.9060 at midday,

133 pips firmer than the previous late session close.

If the yuan finishes the late night close at the midday

level, it would have gained 0.83% versus the dollar for the

week, snapping five straight weeks of losses.

Traders also said the central bank’s reiteration of a stable

yuan and pledge not to resort to flood-like stimulus also

supported the local unit in morning deals.

PBOC Governor Yi Gang said on Friday that China will keep

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the yuan exchange rate “basically stable” this year, while

volatility will be market-driven.

By midday, the global dollar index fell to 104.891

from the previous close of 105.027, while the offshore yuan

was trading at 6.9118 per dollar.

The one-year forward value for the offshore yuan

traded at 6.7322 per dollar, implying a 2.67% appreciation

within 12 months.

The yuan market at 0402 GMT:

ONSHORE SPOT:

Item Current Previous Change

PBOC midpoint 6.9117 6.8808 -0.45%

Spot yuan 6.906 6.9193 0.19%

Divergence from -0.08%

midpoint*

Spot change YTD -0.09%

Spot change since 2005 19.85%

revaluation

Key indexes:

Item Current Previous Change

Dollar index 104.891 105.027 -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 6.9118 -0.08%

*

Offshore 6.7366 2.60%

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 Winni Zhou and Brenda Goh; Editing by Kim

Coghill)