Yuan rises as dollar falters ahead of Jackson Hole, by Reuters

SINGAPORE (Reuters) – The yuan gained along with other Asian currencies on Monday as investors bet that U.S. interest rate cuts will start within a month, implying an end to a long dollar rally.

It rose as high as 7.1437 per dollar in morning trade and was last about 0.2% firmer at 7.1444.

After months of being stuck at the lower end of its daily trading range as China’s economic outlook darkened, the yuan rebounded to reach the mid-range over the past few weeks, largely as the dollar weakened .

At the same time, a massive reversal of short bets against the Japanese yen also weighed on the dollar.

However, a series of disappointing Chinese economic data, including July figures showing the slowest loan growth in 15 years and continued declines in house prices, analysts expect the yuan’s rebound against the dollar may have followed the course.

“The weak outlook for the Chinese economy and expectations for further monetary policy easing will undermine investor confidence in Chinese assets and in turn reduce demand for the yuan,” analysts at Commonwealth Bank of Australia (OTC:) said.

The yuan is “likely to benefit greatly from the USD decline driven by an improving global economy,” they added.

Against a basket of trading partner currencies, the yuan hit 98.07, its lowest level since Jan. 15, according to Reuters calculations from official data.

it was about 0.2 percent firmer at 7.1463 per dollar at 0330 GMT.

Global markets are in a holding pattern ahead of Friday’s speech by Federal Reserve Chairman Jerome Powell in Jackson Hole, where he is expected to make the case for interest rate cuts.

Chinese government yields fell 0.6 basis points to 2.18%. The yield on similar US government debt was 3.9%.

The 7-day onshore yuan repo rate was 1.74%, and in the forward market, the three-month yuan was quoted at 7.0739, 736 pips stronger than the spot rate. Three-month CNH crude was quoted at 7.0744 per dollar.

The People’s Bank of China on Monday set the middle rate, around which the yuan can trade in a 2 percent band, at 7.1415 per dollar, 133 pips firmer than Reuters’ estimate. Key levels onshore vs offshore: * Dollar overnight/ Yuan swap onshore -7.17 pips vs offshore-7.17 * Three month SHIBOR 1.8% vs CNH 3 month HIBOR 2.2%

LEVELS AT 03:35 GMT

INSTRUMENT CURRENT UP/DOWN(-) % CHANGE IN HIGH CURRENT OF THE DAY

vs. USD VS. LAST YEAR TO THE PRESENT MINUTE

CLOSED %

Spot yuan 7.1475 0.25 -0.64 7.1445 7.1585

CNY=CFXS

Offshore 7.1471 0.21 -0.31 7.144 7.1641

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