FX round-up: Offshore yuan hits 2010 low, UK High Court in focus

A drop in the Chinese currency´s value against the US dollar was in focus at the start of the week.

The People´s Bank of China set a daily fixing for the so-called on-shore yuan of 6.769 against the greenback, up from 6.7558 in the previous session, its weakest since September 2010.

Some market commentary attributed a further fall in the currency later in the session to the lower fixing, while other observers were apparently focusing on data showing increased capital outflows.

Versus the US dollar the yuan hit an intra-day low of 6.7880 before recovering to trade at 6,7836, down by just 0.2% on the day.

Data released by the country´s State Administration of Foreign Exchange on 21 October revealed that $44.7bn in yuan payments left the country in September, up from the $27.7bn seen in August.

However, on a trade-weighted basis an index measuring the value of the currency has been basically stable at about 94 since August after weakening by over 6% during the preceeding eight months.

In a research note published on 24 October Julian Evans-Pritchard, China economist at Capital Economics, estimated that outflows had risen from around $40bn per month in July and August to $55bn last month, "the fastest pace since the panic about renminbi devaluation subsided in February", driven by purchases of foreign assets by firms and households.

Nonetheless, inflows from foreigners are again apparent, Julian Evans-Pritchard said.

"Overall, capital outflows remain manageable. But there is a risk that they become a more serious challenge to Chinese policymakers during coming quarters. One trigger might be faster-than-expected rate hikes in the US, which could push Chinese firms to resume paying down their external debt. Another could be the return of worries about the economic outlook for China as the effect of stimulus wears off, " he added.

Elsewhere in the Asia-Pacific region, the value of Japanese exports fell by 9.6% year-on-year in September (consensus: -10.4%), while imports shrank by 16.3% (consensus: -16.6%).

Despite those figures, dollar/yen rose 0.39% to 104.20.

Lastly, and back in the UK, cable was largely unchanged, dipping just 0.03% to 1.2227 in late-evening trading as investors waited on the decision from the UK High Court on the judicial review against Westminster’s Brexit policy as regarded the ability of the government to trigger Article 50 without a parliamentary vote.

Euro/dollar was only 0.09% weaker at 1.0875.

Versus the Canadian Loonie, the US dollar was up 0.27% to 1.3373, as economists reviewed the changes announced by Bank of Canada to its target for core inflation.