Chinese yuan soars as focus shifts to bank lending c.



(Updates national close price, adds analyst commentary and context)

SHANGHAI, Oct. 13 (Reuters) – The Chinese yuan rose slightly against the dollar during the nationwide close on Wednesday, as investors digested upbeat export data and turned to whether the central bank would renew medium-term loans maturing later this week.

Before the market opened, the People’s Bank of China pegged the median yuan rate at 6.4612 to the dollar earlier, lower than the previous patch of 6.4447.

In the spot market, the onshore Yuan opened at 6.4509 to the dollar and touched 6.4449, before closing at 6.4452, 20 pips higher than the previous session’s close.

Currency traders said the policy divergence between China and other major economies would likely cause capital outflows and increase depreciation pressure on the yuan.

Along with rising expectations that the US Federal Reserve will soon scale back pandemic-era stimulus measures, market participants are keen to see whether China’s central bank will renew more than 500 billion yuan ($ 77.53 billion) in loans. medium term due Friday.

“The amount of money injected through MLF operations on Friday may suggest subsequent monetary policy operations,” said Xing Zhaopeng, senior Chinese strategist at ANZ.

“While the net injection of funds is not huge, there is always the possibility of a reduction in the reserve requirement ratio (RRR) or a targeted medium-term loan facility (TMLF) operation.”

The yuan was supported early in trade by surprisingly strong exports, as strong global demand offset some of the pressure on factories from power shortages and the resurgence of domestic COVID-19 cases.

Overnight, the dollar hit a one-year high following expectations that the US Federal Reserve will cut its massive bond buying program next month and concerns about soaring energy prices.

Investors are waiting for US Consumer Price Index data on Wednesday and retail sales data on Friday for further clues as to when the Fed may start cutting its stimulus measures.

Three Fed policymakers said on Tuesday that the economy had recovered enough for the central bank to start withdrawing massive support.

Separately, China announced on Tuesday that it would liberalize the pricing of coal-fired electricity to deal with the worsening energy crisis that has led to production cuts in various industries.

Rising electricity prices could push up the prices of Chinese exports to some extent in the medium term, and the resulting reduction in the trade surplus could put some depreciation pressure on the renminbi exchange rate, said investment bank CICC. ($ 1 = 6.4489 Chinese yuan)

Reporting by Jason Xue, Winni Zhou and Andrew Galbraith; Edited by Lincoln Feast and Ramakrishnan M.


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