Business Recorder
SHANGHAI: China’s yuan weakened slightly against the dollar on Friday as traders keep their eyes on US-Iran talks and war-triggered inflation worries that pushed up US yields. In the near term, analysts expect the yuan to fluctuate against the greenback, whose appeal is being dimmed by easing Middle East tensions, but is drawing support from an increasingly hawkish Fed. “Dollar bulls and bears are locking their horns,” Nanhua Futures said in a note, expecting the yuan to oscillate around 6.8 per dollar as a result. On Friday, the onshore yuan changed hands at 6.7998 at 0335 GMT, softening slightly from Thursday’s close. Prior to the market open, China’s central bank set the guidance rate at 6.8373 per dollar, a tad weaker than the previous session’s level. US-Iran talks were in focus. Washington and Tehran stuck to opposing stances on Thursday over Tehran’s uranium stockpile and controls on the Strait of Hormuz, although US Secretary of State Marco Rubio said there had been “some good signs” in talks. China Merchants Bank said that the dollar will get support from the continued deadlock in the Iran talks, which would translate into higher oil prices. Higher-than-expected US inflation reports for April have already pushed up US yields as investors expect the Federal Reserve will hike interest rates this year instead of cutting them. But Chinese interest rates remain low. The US 10-year yield premium over China is hovering over the highest level in 15 months, pressuring the yuan. “China’s central bank has been signaling a desire to keep the yuan stable,” Nanhua Futures said. “We expect the yuan to move within a narrow range in the short term.”
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