China Yuan weakens as U.S. inflation data jump

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    SHANGHAI, Nov 11 (Businesshala) - China's yuan weakened on
Thursday, after overnight data showed U.S. consumer prices in
October surged at the fastest pace since 1990, boosting the case
for faster Federal Reserve policy tightening.
    The People's Bank of China set the midpoint rate
at 6.4145 per dollar prior to market open, weaker than the
previous fix of 6.3948. 
    In the spot market, the yuan opened at 6.4020 per
dollar and was changing hands at 6.4055 at midday, 158 pips
weaker from the previous late session close. 
    The consumer price index in the U.S. rose 0.9% last month
after gaining 0.4% in September and in the 12 months through
October, the CPI accelerated 6.2%.
    The inflation data beat market expectations, pushed the
greenback to its 16-month high of 94.9 and pressured other
currencies. Traders said it fuelled speculation that the Federal
Reserve may raise interest rates sooner than expected.
    "Clearly the U.S. inflation has becoming an elephant in the
room and the Fed has to take action to tame rising pricing
pressure," said Ken Cheung, Chief Asian FX Strategist at Mizuho
Bank.
    Relations between China and the U.S. are also closely eyed
as traders are awaiting a virtual meeting between Chinese leader
Xi Jinping and U.S. President Joe Biden to be held as soon as
next week.
    Fitch Solutions Country Risk& Industry Research expected the
yuan to trade sideways for the remainder of 2021 but weaken in
2022, as "Beijing’s zero-Covid strategy remains in place, while
the People’s Bank of China retains a loose monetary policy
stance due to ongoing financial distress in the real estate
sector."
    A broad dollar index rose to 94.929 from the previous
close of 94.834. The offshore yuan was trading at 6.406
per dollar. 


    The yuan market at 4:34AM GMT: 
    
    ONSHORE SPOT:
 Item               Current  Previous  Change
 PBOC midpoint      6.4145   6.3948    -0.31%
                                       
 Spot yuan          6.4055   6.3897    -0.25%
                                       
 Divergence from    -0.14%             
 midpoint*                             
 Spot change YTD                       1.92%
 Spot change since 2005                29.21%
 revaluation                           
 
    Key indexes:
     
 Item            Current     Previous  Change
                                       
 Thomson         100.89      100.59    0.3
 Businesshala/HKEX                          
 CNH index                             
 Dollar index    94.929      94.834    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% from official midpoint rate it sets each
morning.

    OFFSHORE CNH MARKET   
  
 Instrument            Current   Difference
                                 from onshore
 Offshore spot yuan    6.406     -0.01%
        *                        
 Offshore              6.5809    -2.53%
 non-deliverable                 
 forwards                        
               **                
 
*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 Andrew Galbraith)
  
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