China’s yuan holds steady on signals to support slumping stock market

SHANGHAI, Feb 7 (Reuters) – China’s yuan held steady on Wednesday against the dollar amid signals authorities were strengthening their resolve to support slumping share markets. Sentiment in Chinese stocks was lifted after regulators announced further curbs on short selling and state investors said they were expanding their stockbuying plans. Bloomberg News also reported that President Xi Jinping would discuss the stock market with financial regulators, though there was no confirmation this had happened or what was discussed. China’s blue-chip CSI300 extended gains in early trades, after logging its biggest one-day rise since Nov. 2022 on Tuesday. The yuan got a boost from the latest measures to counter China’s ongoing equity bear market, on top of the central bank’s clear determination to cap the onshore yuan at 7.20 per dollar before the Lunar New Year holiday, said Alvin Tan, head of Asia FX strategy at RBC Capital Markets. “The market will be closely watching to see what additional measures are taken, otherwise it’s difficult to see China’s equity bear market turnaround decisively yet,” Tan said. Meanwhile, the dollar weakened as 10-year treasury yields dipped to 4.09% from Monday’s top of 4.177%. Prior to the market’s opening, the People’s Bank of China set the midpoint rate, around which the yuan is allowed to trade in a 2% band, at 7.1049 per U.S. dollar, 33 pips firmer than the previous fix at 7.1082. The spot yuan opened at 7.1862 per dollar and was changing hands at 7.1874 at midday, 9 pips firmer than the previous late session close. The dollar index fell to 104.075 from the previous close of 104.213. The offshore yuan was trading 90 pips weaker than the onshore spot at 7.1964 per dollar. The yuan market at 0246 GMT: ONSHORE SPOT: Item Current Previous Change PBOC midpoint 7.1049 7.1082 0.05% Spot yuan 7.1874 7.1883 0.01% Divergence from 1.16% midpoint* Spot change YTD -1.25% Spot change since 2005 15.15% revaluation Key indexes: Item Current Previous Change Thomson 0.0 Reuters/HKEX CNH index Dollar index 104.075 104.213 -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 7.1964 -0.13% * Offshore 7 1.50% 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 Himani Sarkar)

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