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SHANGHAI/SINGAPORE — China’s yuan

inched higher against the dollar on Tuesday, while investors

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largely shrugged off better-than-expected domestic economic data

as underlying momentum suggested an uneven post-COVID recovery.

China’s economy grew at a faster-than-expected pace in the

first quarter, as the end of strict COVID curbs lifted

businesses and consumers out of crippling pandemic disruptions,

although global headwinds pointed to a challenging outlook.

“While the headline GDP figure was upbeat, the March data

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pointed to an uneven recovery,” said Ken Cheung, chief Asian FX

strategist at Mizuho Bank.

“Domestic consumption was proved to be the pillar to drive

the economy recovery but industrial production was disappointing

given the strong rebound in exports growth.”

Prior to market opening, the People’s Bank of China (PBOC)

set the midpoint rate at 6.8814 per dollar, 135 pips

or 0.2% weaker than the previous fix of 6.8679.

In the spot market, the onshore yuan opened at

6.8758 per dollar and was changing hands at 6.8745 at midday, 72

pips firmer than the previous late session close.

The yuan hardly reacted to the GDP data, currency traders

said, adding that expectations for widening China-U.S. yield

differentials also capped the local currency’s strength.

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Those view were fed by a belief among some traders that

Beijing could ease monetary policy further to aid the economic

recovery – a contrast to the Federal Reserve which is likely to

raise its policy rate once more in May.

“I think the data is overall good, including the headline

figure, consumption and employment data,” said Zhou Hao,

economist at Guotai Junan International.

“I think the monetary policy will continue to be supportive,

and in general, chances of an interest rate cut are still

relatively high.”

By midday, the global dollar index fell to 102.044

from the previous close of 102.103, while the offshore yuan

was trading at 6.8801 per dollar.

The one-year forward value for the offshore yuan

traded at 6.7108 per dollar, indicating a 2.52% appreciation

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within 12 months.

The yuan market at 0400 GMT:

ONSHORE SPOT:

Item Current Previous Change

PBOC midpoint 6.8814 6.8679 -0.20%

Spot yuan 6.8745 6.8817 0.10%

Divergence from -0.10%

midpoint*

Spot change YTD 0.37%

Spot change since 2005 20.39%

revaluation

Key indexes:

Item Current Previous Change

Dollar index 102.044 102.103 -0.1

*Divergence of the dollar/yuan exchange rate. Negative number

indicates that spot yuan is trading stronger than the midpoint.

The People’s Bank of China (PBOC) allows the exchange rate to

rise or fall 2% from official midpoint rate it sets each

morning.

OFFSHORE CNH MARKET

Instrument Current Difference

from onshore

Offshore spot yuan 6.8801 -0.08%

*

Offshore 6.7175 2.44%

non-deliverable

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 Winni Zhou and Tom Westbrook

Editing by Shri Navaratnam)