The yuan closed slightly higher against the dollar on Tuesday to a new high of nearly a week, and the mid-price also rebounded 124 points to recover more than half of yesterday’s losses. Traders said that the rise in U.S. bond yields slightly boosted the dollar, the yuan basically followed the dollar oscillation during the day, is expected to be difficult to get out of the range in the short term; concern about the U.S. inflation data to be released later.
They also pointed out that China’s import and export data for the first quarter was strong, but did not exceed market expectations, and the impact of the data on the currency market was limited; if U.S. inflation data and retail sales data are strong this week, the dollar may gain momentum again.
“There is still room for U.S. bond yields to rise during the year, which is supportive of the dollar, and overall the dollar will be stronger than previously expected,” said a foreign bank trader, while the better performance of China’s exports is good for the yuan.
Another Chinese bank trader said, recently there is no big event beyond expectations, the yuan is estimated to be stable, trade data is also within expectations.
UBS Securities reported that China’s current account surplus will decrease slightly in 2021, FDI will remain a net inflow and capital outflow is expected to be moderate; China’s strong balance of payments will make the yuan exchange rate firm, but if the dollar moves stronger than expected, it will put pressure on the yuan, maintaining the year-end forecast of the yuan to dollar exchange rate at around 6.4 yuan.
CICC reported that under the controlled credit line, it is expected that the growth rate of social financing is likely to fall again and continue to go down, which will drag down the growth of China’s economic momentum. After the three major inflection points of social financing, economic momentum and dollar liquidity are further confirmed, the downward trend of Chinese treasury rates will also become clearer and the downward space will be further opened. While the upward trend of U.S. bond rates remains unchanged, the spread between China and the U.S. will still be further narrowed.
Rosengren, president of the Federal Reserve Bank of Boston, said Monday that thanks to loose monetary and fiscal policy, the U.S. economy could rebound sharply this year, but there is still much room for improvement in the job market. U.S. President Joe Biden on Monday sought to advance the infrastructure plan by holding a bipartisan meeting at the White House.
U.S. Treasury Secretary Yellen will not list China as an exchange rate manipulator in the exchange rate report, media said. The U.S. Treasury Department listed Vietnam and Switzerland as exchange rate manipulators in its exchange rate report released late last year.
In global currency markets, the dollar rose slightly on Tuesday, helped by rising U.S. bond yields, but the U.S. index is still close to a three-week low, as the market awaits U.S. inflation data later today.
CIMB’s latest report said that considering the current 10-year U.S. bond rate is approaching the vicinity of 1.7%, the overall upward movement in the second quarter may slow somewhat, but the general upward trend remains unchanged. If there is an over-expected adjustment on the supply side, such as the Treasury increasing the size of Treasury bond issuance in May, it may push U.S. bond rates up again at an accelerated pace. “The risk at the level of the Fed’s monetary policy lies more in tightening than in further easing.”
Recent Comments