SHANGHAI/BEIJING, March 16 - The yuan closed up 335 points (or 0.53 percent) against the dollar in spot CNY=CFXS on Wednesday, hitting a near one-week high, while the mid-price continued to fall to a new near three-month low. Traders said that the recent outflow of foreign capital from Russia, where sanctions have sparked market concerns over China-related assets, has significantly pressured the yuan, but the Financial Committee meeting in the afternoon boosted market sentiment sharply and the yuan accelerated its gains and recovered the 6.35 handle.
They also pointed out that it remains to be seen whether the Financial Committee meeting can reverse the pessimistic expectations of foreign investors, but the recent persistence of customer demand for foreign exchange settlement will also limit the space for RMB adjustment.
"Yesterday the USD/CNY has not moved up and customers have been settling a lot recently because the price is good," said a trader at a Chinese bank.
The trader also pointed out that the Financial Committee meeting stabilized the market's pessimistic sentiment in the early part of the market so that it is no longer "a plunge", but how the future evolution can not be determined; compared to foreign risk aversion, the impact of the Fed rate hike is relatively limited, after all, in the Fed there are seven expected rate hikes when the yuan is still very strong.
"This wave of devaluation is basically flow-driven, and what flow thinks and whether it will run again is anyone's guess," the trader said.
Chinese Vice Premier Liu He, head of the Finance Committee, said at a special meeting on Wednesday that the capital market should be kept "running smoothly". Any policy that has a significant impact on the capital market should be coordinated with the financial management in advance to maintain the stability and consistency of policy expectations; the Financial Committee will increase coordination and communication, and if necessary, accountability.
Xie Yaxuan, chief macro analyst of China Merchants Securities, said that the market turmoil caused by the Russia-Ukraine conflict has not yet subsided, and the impact of the tightening of monetary policy in Europe and the United States has begun to emerge, coupled with the impact of the domestic epidemic on economic expectations has not improved, China's international capital outflow pressure will continue, and the RMB exchange rate may further depreciate to release some of the capital outflow pressure.
The Wall Street Journal reported Tuesday that Saudi Arabia is considering accepting payment in yuan instead of dollars for oil sales to China. Traders, for their part, believe that the news of Saudi oil exports to China switching to yuan settlement has a psychological boost to the yuan, but it is a long-term process.
The U.S. released a strong rise in the February PPI, driven by a surge in the price of commodities such as gasoline, which is expected to climb further as crude oil and other commodities become more expensive following Russia's war on Ukraine.
Russia said Tuesday it has placed U.S. President Joe Biden, Canadian Prime Minister Justin Trudeau and 12 senior U.S. officials on a "stop list" that will bar them from entering Russia.
In global currency markets, the Australian dollar jumped on Wednesday after a speech by a senior Chinese official boosted hopes for a ramp-up in stimulus measures. The dollar was near a five-year high against the yen, as markets expect the Federal Reserve to announce its first rate hike in three years.
Long-term U.S. bond yields surged to more than two-year highs before the Federal Reserve announced its policy resolution, providing support for the dollar . The yen was also hit by soaring oil and other commodity prices. Climbing oil and commodity prices have weakened Japan's terms of trade.
Money markets fully digested expectations that the Fed would raise interest rates for the first time in three years and put the chances of a half-point hike at 13 percent.
The following are the closing and mid-price of the RMB against the USD in the onshore market today, as well as the main quotes of the RMB in the offshore market.
Onshore market CNY/USD (16:35am) Today Previous Day Up and Down
Spot official closing price 6.3465 6.38 0.53%
Median price 6.38 6.376 -0.06%
Spot Turnover $29.595 billion $42.923 billion
Intraday volatility (pips) 274 Daily low 6.3695 Daily high 6.3421
Year-to-date increase/decrease 0.42%
30.41% increase and decrease since the 2005 exchange rate reform
One-year USD/CNY swap 997 1036.5
Offshore RMB Market Today Previous Day
CNH spot 6.3589 6.382 0.36%
One-year USD/CNH swaps 977 1053.3
One-year NDF 6.4673 6.4918 0.38%
