SHANGHAI- China’s yuan slipped against the dollar on Monday as rising inflation and concerns Russia could invade Ukraine supported the greenback, although it firmed against a basket of currencies.
Traders said that while corporate demand for the yuan has eased following the week-long Lunar New Year holiday, it continues to provide some support for the currency.
“In the near term the market may be more affected by the situation in Russia and Ukraine, and the dollar will continue to rise, but the yuan should be able to maintain a narrow range,” said a trader at a Chinese bank.
On Monday, the People’s Bank of China (PBOC) set the yuan’s midpoint rate in line with market expectations at 6.3664 per dollar, firmer than Friday’s fix of 6.3681.
Spot yuan opened at 6.3610 per dollar and edged up to 6.3595 at midday, still 53 pips weaker than the late session close on Friday.
The offshore yuan eked out a small gain against the dollar, firming to 6.3648 from a close of 6.3668.
Another trader at a foreign bank said that a worsening situation in Ukraine could spark a jump in commodity prices, which might lead to both a stronger dollar and a rise in the yuan against other currencies.
The trade-weighted China Foreign Exchange Trade System (CFETS) basket rose 0.19 percent on Monday morning to touch a one-week high of 102.81, a ccording to Reuters calculations.
