By Georgina Lee HONG KONG, Jan 19 (Reuters) – The yuan weakened against the U.S. dollar on Thursday after President Xi Jinping expressed concern a day earlier that the COVID-19 wave hitting China could spread to rural areas during the country’s Lunar New Year holidays. Spot yuan opened at 6.7656 per dollar and was changing hands at 6.7725 at midday, 105 pips away from the previous day’s late session close and 0.08% away from the midpoint. The People’s Bank of China set the midpoint rate at 6.7674 per U.S. dollar prior to market open, weaker than the previous fix of 6.7602. The spot rate is allowed to trade within a range of 2% above or below the official fixing on any given day. Economists will be looking at the holiday season for hints of a rebound in Chinese consumer spending, especially after fourth-quarter GDP data on Tuesday confirmed a sharp economic slowdown. Ken Cheung, chief Asian FX strategist at Mizuho Bank, said he expected China’s economy to bounce back within a year of reopening. But he added that a “quick normalization in consumption and investment is less certain”, given the economic damage inflicted by three years of zero-COVID policies and the impact of regulatory crackdowns. Trading was thin ahead of the week-long Lunar New Year holiday, which starts on Jan. 21. Turnover was just $8.6 billion as of midday, compared with a normal half-day volume of about $15 billion. A broad rise for the dollar on Thursday also weighed on the yuan. The safe-haven greenback has been in demand as concerns about the health of the U.S. economy mount. Data on Wednesday showed U.S. retail sales in December fell by the most in a year, while manufacturing output suffered its biggest drop in almost two years. “The rebound in the U.S. dollar, after being sold off late last year, was weighing on Asian currencies,” said Khoon Goh, head of Asia research at ANZ. Offshore yuan was trading 0.07% weaker than onshore spot at 6.7771 per dollar. The one-year forward value for the offshore yuan was at 6.6375 per dollar, indicating appreciation of roughly 2.10% within 12 months. Trade in yuan against many Asian currencies was also likely to remain thin, analysts said, noting a holiday in Vietnam on Friday. The yuan market at 3:30AM GMT: ONSHORE SPOT: Item Current Previous Change PBOC midpoint -0.11% 6.7674 6.7602 Spot yuan 6.762 -0.16% 6.7725 Divergence from midpoint* 0.08% Spot change YTD 1.88% Spot change since 2005 revaluation 22.21% OFFSHORE CNH MARKET Instrument Current Difference from onshore Offshore spot yuan * -0.07% 6.7771 Offshore non-deliverable 6.636 1.98% 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 Georgina Lee; Editing by Edwina Gibbs)
