By Chuck Mikolajczak

New York, Oct 12 (Reuters)The dollar index was little changed near three-week lows on Monday as optimism over the possibility of a COVID-19 relief bill was curbed by concern over the pandemic, while China’s yuan fell after the People’s Bank of China (PBOC) changed its reserve requirements policy.

On Sunday, the Trump administration called on Congress to pass a stripped-down coronavirus relief bill using leftover funds from an expired small-business loan program, as negotiations on a broader package continue to run into roadblocks. A White House spokeswoman said on Monday that Senate Republicans will go along with what Trump wants in legislation.

The greenback has held within a range of about 2% over the past three weeks as talks have gone back and forth. The dollar had its biggest loss in six weeks on Friday amid rising hopes a fiscal stimulus package would be agreed to stem the economic fallout from COVID-19. More stimulus is seen as negative for the dollar.

“The dollar just retains this soft underbelly on expectations that sooner or later there will be some stimulus out of Washington,” said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington DC.

“At the same time, if you look at some of the election developments, the polls are trending in a way that is reducing worries about a contested outcome, that is more risk positive and therefore dollar negative.”

Opinion polls show Biden with a substantial lead nationally, but the advantage is smaller in some of the states that may decide the election outcome.

The offshore yuan CNHUSD=R fell 0.76% against the dollar after China’s central bank said on Saturday it would lower the reserve requirement ratio for financial institutions when conducting some foreign exchange forwards trading, a move seen

New York (Reuters) – The dollar index held near three-week lows on Monday as optimism over the possibility of a COVID-19 relief bill was curbed by concern over the pandemic while China’s yuan fell after the People’s Bank of China (PBOC) changed its reserve requirements policy.

FILE PHOTO: Saudi riyal, yuan, Turkish lira, pound, U.S. dollar, euro and Jordanian dinar banknotes are seen in this illustration taken January 6, 2020. REUTERS/Dado Ruvic/Illustration

On Sunday, the Trump administration called on Congress to pass a stripped-down coronavirus relief bill using leftover funds from an expired small-business loan program, as negotiations on a broader package continue to run into roadblocks.

The greenback has held within a range of about 2% over the past three weeks as talks have gone back and forth. The dollar had its biggest loss in six weeks on Friday amid rising hopes a fiscal stimulus package would be agreed to stem the economic fallout from COVID-19. More stimulus is seen as negative for the dollar.

“The chances of getting a comprehensive stimulus deal before the election are slim,” said Edward Moya, senior market analyst, at OANDA in New York.

“So what that means is that the damage to the economy is going to grow and it means that right now we are talking somewhere around $1.8 or $2 trillion …and that just means the stimulus is going to be bigger the longer they wait.”

The offshore yuan CNHUSD=R fell 0.8% against the dollar after China’s central bank said on Saturday it would lower the reserve requirement ratio for financial institutions when conducting some foreign exchange forwards trading, a move seen as a bid to curb recent yuan appreciation.

The yuan had reached a more than 17-month high on Friday in offshore trade and has gained nearly 8% against the

SHANGHAI (Reuters) – China’s move to cool a rising yuan stands little chance of stopping further gains, international banks say, as the strength of the world’s number two economy and a near-record yield advantage drive big and steady inflows.

Over the weekend, the People’s Bank of China (PBOC) scrapped a requirement for banks to hold a reserve of yuan forward contracts, removing a guard against depreciation and sending the currency down 1% for its steepest drop since March.

Yet an identical move three years ago ultimately proved ineffective, and investors say this time the conditions are even more likely to buoy the yuan, perhaps as far as 6.5 per dollar.

“In all previous instances, the impact of the regulatory change was temporary,” said Eugenia Victorino, head of Asia strategy at Swedish bank SEB in Singapore.

“We continue to expect the yuan to remain on an appreciation trend, with USD/CNY approaching 6.60 by end-2021,” she said.

Goldman Sachs forecasts yuan, last quoted at 6.7436

, will hit 6.5 per dollar in 12 months.
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Much as in 2017, the PBOC’s move follows a long spell of appreciation. The yuan has strengthened more than 6% since late May and just closed its best quarter in a dozen years as China leads the world out of the coronavirus pandemic and soaks up capital flows.

Foreign holdings of Chinese government debt rose at the fastest pace in more than two years last month, with the spread between Chinese

and U.S. 10-year

government bond yields holding near record highs scaled in July. In another nudge for the yuan to weaken, Beijing granted $3.4 billion in outbound investment quotas last month, the first fresh permission for such flows since April 2019.
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Yet analysts say China’s economy, projected to keep growing as the rest of

(Bloomberg) — The offshore yuan tumbled the most in almost seven months after China’s central bank took steps to restrain the currency’s rally.

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The exchange rate slumped as much as 1.03% against the dollar in late Hong Kong trade on Monday. Declines steepened without an obvious trigger just before the 4:30 p.m. official close of the onshore rate, which helps determine the next day’s reference rate. The drop may mark the start of a period of consolidation after recent gains, strategists said.

The People’s Bank of China on Saturday scrapped a two-year rule that made it expensive to bet against the yuan after the currency surged to its highest in 18 months. The PBOC had in recent weeks refrained from sending clear signals on the yuan, reinforcing speculation that policy makers looking to boost consumption at home wanted a stronger yuan.

But as gains accelerated, it appears officials grew concerned the currency risked becoming a one-way bet. Reasons to buy the yuan were many. Polls showing Democrat Joe Biden may win the election. Failed U.S. stimulus talks driving the dollar lower. An attractive yield gap over Treasuries. An upcoming Communist Party plenum this month where stimulus measures are expected to be announced.

“China is just taking preemptive action to keep the yuan steady as the U.S. election could add even more appreciation pressure,” said Ken Cheung, chief Asia currency strategist at Mizuho Bank Ltd. “The yuan will be anchored for the time being — we see it trading in a 6.7-6.8 range in the near term.”



chart: PBOC acts to restrain bullish bets on the yuan


© Bloomberg
PBOC acts to restrain bullish bets on the yuan

The offshore rate was down almost 0.9% at 6.745 at 7:06 p.m., while on the onshore yuan last traded at 6.749.

The late slump may have been driven by short covering.

By Hideyuki Sano



a close up of a bottle: FILE PHOTO: Saudi riyal, yuan, Turkish lira, pound, U.S. dollar, euro and Jordanian dinar banknotes are seen in this illustration


© Reuters/DADO RUVIC
FILE PHOTO: Saudi riyal, yuan, Turkish lira, pound, U.S. dollar, euro and Jordanian dinar banknotes are seen in this illustration

TOKYO (Reuters) – The dollar inched up in early Monday trade as riskier currencies slipped after negotiation on a U.S. stimulus package ran into resistance and as the yuan dropped after China’s central bank took a measure seen as aimed at curbing its strength.

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The euro slipped 0.1% to $1.1817 while the Australian dollar shed 0.3% to $0.7222 . The yen was little changed at 105.52 to the dollar .

The U.S. dollar index edged up to 93.108 , bouncing back from Friday’s near-three-week low of 92.997. The index saw its biggest loss in six weeks on Friday on hopes that a deal for new U.S. stimulus would be reached.

President Donald Trump on Friday offered a $1.8 trillion coronavirus relief package in talks with House Speaker Nancy Pelosi – moving closer to Pelosi’s $2.2 trillion proposal.

But Trump’s offer drew criticism from several Senate Republicans, many of whom are uneasy about the nation’s growing debt and concerned a deal would cost Republicans support in the upcoming presidential election, denting the risk-on mood.

Still, with Nov. 3 election only weeks away, investors bet that Democrat Joe Biden is more likely to win the U.S. presidency and offer a larger economic package.

“Over the past few days, the markets seem to assume Biden will win the election. Trump seems desperate to get a deal but his comments are getting treated like a noise,” said Yusuke Okada, manager of forex at Mitsubishi Trust Bank.

“But I do think we could see a return of political uncertainties by the election. Markets seem to have priced in only the good news,” he added.

Video: Potential US