Yuan extends losses, falls to over 3-month low as dollar stays strong

SHANGHAI, May 3: China's yuan fell further against the U.S. dollar on Thursday, reaching a three-month low as the greenback remained strong and the official midpoint setting was the softest since January.
The dollar traded near a four-month high against a basket of currencies, having recovered from a brief dip after the Federal Reserve kept interest rates steady and said inflation had "moved close" to its target.
On Wednesday, the yuan dropped 0.5 percent against the dollar, its biggest one-day loss in percentage terms since March 1. Prior to Thursday's market opening, the People's Bank of China lowered the midpoint rate to a weaker-than-expected 6.3732 per dollar, the softest since Jan.
24. Thursday's fixing was 62 pips or 0.1 percent weaker than the previous fix of 6.3670.
In the spot market, the onshore yuan opened at 6.3664 per dollar and eased to 6.3705 at one point in morning trade, the weakest since Jan. 24.
By midday, the spot yuan pared some losses and was changing hands at 6.3663, 33 pips weaker than the previous late session close.
The yuan's losses have come just before of important trade talks between senior Trump administration and Chinese officials.
Chinese state media have said Beijing will stand up to U.S. bullying if needed but that it was still better to hash things out around the negotiating table.
In recent weeks, China's efforts to guide the yuan lower through daily fixings have been much more aggressive than traders expected, in what analysts say are moves targeted at slowing the currency's gains against emerging market counterparts.
Traders said that while dollar strength continued to put pressure on the spot yuan on Thursday morning, the market remained largely stable as corporate clients did not react sharply and load up on dollars.
"Investors have been able to view the passive depreciation of the yuan in the wake of a stronger dollar... it seems no one wants to take the initiative of shorting the Chinese unit," said an analyst at a Chinese bank.
Multiple traders said they expect the yuan to remain between 6.3 and 6.4 per dollar in May.
The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 98.25, weaker than the previous day's 98.29.
The offshore yuan was trading 0.03 percent firmer than the onshore spot at 6.3646 per dollar.
Offshore one-year non-deliverable forwards contracts (NDFs), considered the best available proxy for forward-looking market expectations of the yuan's value, traded
at 6.469, 1.48 percent weaker than the midpoint. REUTERS