CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 81.40% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Scan to Download iOS&Android APP

China yuan weakens as economy struggles

By Reuters_News

04:56, 10 August 2022

Share this article

What You Need to Know

The week ahead update on major market events in your inbox every week. Subscribe
Chinese Yuan banknotes are seen in this illustration picture taken June 14, 2022.
Chinese Yuan banknotes are seen in this illustration picture taken June 14, 2022.

- The yuan eased on Wednesday, weighed down by signs that China's COVID-hit economy is struggling to regain momentum and by lingering concerns over heightened Sino-U.S. tensions over Taiwan.

The currency's losses were limited, however, by caution ahead of U.S. inflation data later in the global day, which could provide hints to the Federal Reserve's plans for future monetary tightening and the direction of the dollar.

The People's Bank of China set the midpoint rate at 6.7612 per dollar prior to the market open, weaker than the previous fix 6.7584.

In the spot market, the yuan opened at 6.7540 per dollar and was changing hands at 6.7567 at midday, 38 pips weaker from the previous late session close.

Data on Wednesday showed China's factory-gate inflation eased to a 17-month low in July while consumer prices picked up pace, but both figures came in lower than market expectations, adding to market worries that domestic activity remained subdued.

"Non-food prices actually declined in July from their June level, which reflects weak domestic demand," said Zhiwei Zhang, Chief Economist at Pinpoint Asset Management.

"COVID outbreaks in many cities and the lack of further policy stimulus may have led to weaker growth in July."

Chinese cities from tropical Hainan, to Xinjiang in the west and far-flung Tibet, have reported COVID-19 outbreaks, and the domestic daily caseload has hovered around 1,000 in recent days.

Zhang's comments were echoed by Ken Cheung, chief Asian FX strategist at Mizuho Bank, who expects COVID flare-ups, subdued consumption and a grim growth outlook would keep the yuan under pressure.

Analysts from China Construction Bank said geopolitical tensions should also be watched closely.

China is continuing to launch military drills around Taiwan in protest against U.S. House Speaker Nancy Pelosi's recent visit to the island.

About 20 Chinese navy and Taiwan navy ships stayed close to the median line of the Taiwan Strait as of Wednesday morning, a source told Reuters.

"In the near-term, we expect the heightened geopolitical tensions over Taiwan to gradually die down after Beijing concludes its military drills," said Kaiwen Wang, China Stragetist at Clocktower Group.

"But, it is highly likely that the frequency of tensions in the Taiwan Strait will increase as Beijing shrugs off the geographical limits to its military drills and as Western politicians feel more emboldened to challenge Beijing with provocative island visits."

The global dollar index .DXY fell to 106.27 from the previous close of 106.374. The offshore yuan was trading at 6.7604 per dollar.

 

 

The yuan market at 4:31AM GMT:

 

XRP/USD

0.48 Price
-0.300% 1D Chg, %
Long position overnight fee -0.0500%
Short position overnight fee 0.0140%
Overnight fee time 21:00 (UTC)
Spread 0.00600

Gold

1,706.01 Price
-1.160% 1D Chg, %
Long position overnight fee -0.0157%
Short position overnight fee 0.0056%
Overnight fee time 21:00 (UTC)
Spread 0.20

US100

11,480.30 Price
-0.880% 1D Chg, %
Long position overnight fee -0.0138%
Short position overnight fee 0.0041%
Overnight fee time 21:00 (UTC)
Spread 1.5

BTC/USD

20,046.05 Price
-1.560% 1D Chg, %
Long position overnight fee -0.0500%
Short position overnight fee 0.0140%
Overnight fee time 21:00 (UTC)
Spread 60.00

ONSHORE SPOT:

Item

Current

Previous

Change

PBOC midpoint

6.7612

6.7584

-0.04%

Spot yuan

6.7567

6.7529

-0.06%

Divergence from midpoint*

-0.07%

  

Spot change YTD

 

 

-5.95%

Spot change since 2005 revaluation

 

22.49%

 

Key indexes:

 

Item

 

Current

Previous

Change

Thomson Reuters/HKEX CNH index

 

 

0.0

Dollar index

106.27

106.374

-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 percent from official midpoint rate it sets each morning.

 

OFFSHORE CNH MARKET

 

Instrument

Current

Difference from onshore

Offshore spot yuan *

6.7604

-0.05%

Offshore non-deliverable forwards **

6.6895

1.07%

 

*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 Jason Xue and Brenda Goh; Editing by Kim Coghill

What You Need to Know

The week ahead update on major market events in your inbox every week. Subscribe
The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
Capital Com is an execution-only service provider. The material provided on this website is for information purposes only and should not be understood as an investment advice. Any opinion that may be provided on this page does not constitute a recommendation by Capital Com or its agents. We do not make any representations or warranty on the accuracy or completeness of the information that is provided on this page. If you rely on the information on this page then you do so entirely on your own risk.

Still looking for a broker you can trust?

Join the 450.000+ traders worldwide that chose to trade with Capital.com

1. Create & verify your account 2. Make your first deposit 3. You’re all set. Start trading