Forex Comment Mar 26

Dollar down for third day... and a questionable Bloomberg yuan story

Market rout continues, taking toll on the greenback

by Uwe Parpart
Dollar down for third day ... and a silly Bloomberg yuan story

(ATF) – The dollar opened the Asia trading day at 101 on the DXY gauge, then lost ground throughout the day to a low of 100.0670 by 7:30pm HK time, a near 1% drop.

At 10pm HK time (10am NY time), the greenback gauge was trading at 99.9640, a 10-day low – not too surprising given the record high US unemployment claims released earlier.

Perhaps bored by the stability of the yuan against the greenback, Bloomberg analysts in the course of the Asian day conjured up a story with the key line reading, "China set its daily reference rate for the yuan at a stronger-than-expected level Thursday, with the central bank perhaps signaling efforts to support the currency following recent weakness."

An amazing bit of arbitrary speculation even by Bloomberg standards not afraid of speculating about Chinese policy motives.

So, here are the facts: The yuan morning fixing today was at 7.0692, nearly identical to the day prior, stronger than on March 23, 24, and 20, but quite a bit weaker than the March 19 level of 7.0522. In intraday trading, CNY ranged from 7.0955 in the Asian morning to 7.0725 (bid) at 10pm HK time, weakening marginally with the USD, remaining in a narrow range.

Contrary to Bloomberg speculation, the PBOC has had no reason to either arbitrarily weaken or strengthen the yuan. The currency's stability accurately reflects the stability of Chinese rates and the impact of steady recovery from three months of the coronavirus.

I attach an opinion piece by a respected Chinese analyst, whose explanation of the yuan stability I endorse.