Yuan stagnates as COVID outbreaks and housing sector woes hurt outlook

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SHANGHAI — The Chinese yuan was roughly stable

against the dollar on Tuesday, as traders took stock of the

economic impact of new COVID-19 clusters and government

efforts to support the struggling real estate sector.

The market was also closely watching the approach to the center

banking meetings and Wednesday setting of China’s benchmark

lending rates, which some expect will remain unchanged.

The onshore yuan changed hands at 6.7472 to

noon, slightly weaker than the previous close at the end of the session,

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after China’s central bank sets softer median rate

.

China has reported 776 new cases of coronavirus, raising fears

new activity restrictions to curb epidemics. But the

concern was offset by investor optimism that the Chinese

government had taken initiatives to stabilize the beleaguered population

real estate sector, where a wave of buyers refused

pay off mortgages on unfinished homes.

« Overall, the real estate market rout is far from abating.

and optimism can evaporate quickly,” warned Ken Cheung,

strategist at Mizuho Bank Ltd.

“It will take time to restore confidence in the property

sector and complete unfinished residential projects.

Central bank moves are also a focus.

Markets expect interest rates to rise 75 basis points to

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the US Federal Reserve meeting next week, moving away

earlier bets that rates could rise by as much as 100 basis points.

China, which eased its monetary policy to stimulate growth,

will set the benchmark lending prime rate (LPR) on Wednesday. Swiss

UBP bank expects China to keep its one-year LPR peg unchanged

at 3.7%.

“Window to cut rates is now closed, as CPI nears

to the PBOC’s 3.0% target amid peak Fed ferocity, » UBP wrote,

referring to the People’s Bank of China (PBOC).

MayBank said in a note that the mixed risk narrative – housing

and COVID risks at play as authorities pledge to strengthen

economic support – in the context of broader fluctuations in the dollar,

yuan to see more short-term two-way fluctuations.

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The yuan market at 06:07 GMT:

SPOT ON LAND:

Article Current Previous Edit

PBOC Midpoint 6.7451 6.7447 -0.01%

Spot Yuan 6.7471 6.7455 -0.02%

Divergence from 0.03%

environment*

One-off change since the start of the year -5.81%

One-off change since 2005 22.67%

revaluation

Key indexes:

Article Current Previous Edit

Thomson 0.0

Reuters/HKEX

CNH Index

Dollar index 107.384 107.366 0.0

*Divergence of the dollar/yuan exchange rate. Negative number

indicates that the spot yuan is trading stronger than the midpoint.

The People’s Bank of China (PBOC) allows the exchange rate to

increase or decrease by 2% from the official median rate it sets

Morning.

CNH OFFSHORE MARKET

Instrument current difference

earthen

Offshore Spot Yuan 6.7516 -0.07%

*

Offshore 6.708 0.55%

not available

forward

**

*Premium for offshore spot on onshore

**Figure reflects difference from official PBOC midpoint,

since non-deliverable futures are settled relative to the midpoint.

.

(Reporting by Shanghai Newsroom; Editing by Jacqueline Wong)