China's yuan eases as rising oil prices, higher US yields weigh

Business Recorder reported that the Chinese yuan lost ground to the dollar on Wednesday, as rising Treasury yields and stronger crude prices pushed the greenback higher and added strain on regional currencies. By 0309 GMT the spot rate stood 0.03 per cent weaker at 6.7225 per dollar, having moved within a band of 6.7222 to 6.7250. The move followed a firmer dollar over the week, when fresh US-Iran hostilities lifted oil and revived inflation worries.

The People's Bank of China set its midpoint at 6.7829 per dollar before the open, which was 591 pips weaker than a Reuters estimate. Daily trading is allowed to range up to 2 per cent either side of that fixing. MUFG Bank analyst Lloyd Chan saw regional currencies under pressure from the rise in US yields and oil. Western Securities analysts doubted the dollar's strength would endure, noting that a possible Federal Reserve rate increase in September would not ease long-term Treasury risks.

Goldman Sachs analysts said solid export growth and subdued domestic demand should keep the yuan on an appreciation path despite slower July growth. The currency is 4.0 per cent stronger against the dollar this year, and market participants expect gains to stay gradual because China is likely to limit appreciation to support exporters.