China's five-year treasury bond futures opened lower on Thursday, with the contract for settlement in March 2018 opening 0.04 percent lower at 96.2 yuan (14.77 USA dollars).
China's adjustment to the way it sets the reference rate for its tightly managed currency, suspending a tool for fine-tuning the exchange rate, is a fresh warning to would-be speculators that gives the yuan scope to retreat after a year of heady gains. Sources familiar with the matter said the PBOC had told banks that contribute mid-point estimates they could adjust the "counter-cyclical factor" by themselves, effectively allowing them to minimise its influence on their exchange rate contributions.
The Chinese yuan strengthened 6.8 percent against the dollar last year, the biggest gain in nine years, reversing three straight years of depreciations.
The central parity rate of the Chinese currency, the renminbi or the yuan, weakened 239 basis points to 6.5207 against the USA dollar Wednesday, the lowest point in about two weeks. Traders confirmed the fixing matched their models, which neutralised the effect of the "X" factor.
The most active rebar on the Shanghai Futures Exchange edged up 0.7 percent to 3,849 yuan ($589.89) a tonne by 0229 GMT. As of midday, the spot yuan rate was changing hands at 6.5218 per dollar, 67 pips firmer than the previous late session close but 0.02 percent weaker than the midpoint. Its offshore counterpart also eased to a two-week low of 6.5450 per dollar in morning trade before paring the losses. He expects the yuan to trade in a range between 6.5 and 6.7 per dollar in the first half of this year.
In 2018, Zhou expected that the yuan will move up slightly against a basket of currencies.
The global dollar index fell to 91.838 from the previous close of 91.852. The contract for settlement in September 2018 had no trading at opening. Negative number indicates that spot yuan is trading stronger than the midpoint.
Offshore one-year non-deliverable forwards contracts (NDFs), considered the best available proxy for forward-looking market expectations of the yuan's value, traded at 6.6195, 1.91 percent weaker than the midpoint.