* C.bank sets stronger yuan midpoint for first time since
Wednesday
* Spot yuan hits the top end of the trading band vs dollar
* Still room for appreciation, if c.bank permits – traders
By Pete Sweeney
SHANGHAI, Nov 20 (Reuters) – The Chinese central bank
allowed the yuan to trade slightly stronger on Tuesday, but it
was still not enough for a market overloaded with dollars as the
yuan moved straight to the limit of its daily trading range.
The yuan firmed to 6.2297 per dollar in morning
trade, from Monday’s close of 6.2345.
The People’s Bank of China (PBOC) fixed the official
midpoint rate at 6.2926 per dollar, compared to
Monday’s fix of 6.2975, allowing the yuan to trade in a stronger
range for the first time since last Wednesday, when the Chinese
currency hit a record high against the dollar.
Under China’s managed float regime, the dollar/yuan exchange
rate is allowed to diverge away from the official midpoint rate
by 1 percent in either direction.
For most of the year, the spot rate has fluctuated well
within that range. But this month, the market has kept pushing
the yuan to the top of its daily trading bands, and volumes have
dropped off as customers refused to buy dollars in expectation
that the central bank would eventually let the yuan strengthen
further.
“I think there’s still room for the yuan to appreciate,”
said a trader at a state-owned bank in Shanghai.
“But it is up to the bank to let it. If the bank allows more
appreciation through the midpoint, the rate will go up. If the
bank intends to force it down, that is what will happen.”
Corporates appear to have plenty of dollars in hand, boosted
by stronger-than-expected export earnings in October – most of
which the PBOC allowed to remain in the banking
system.
Central bank data shows that Chinese banks took on more than
$20 billion worth of foreign currency in September, which
together with a $32 billion trade surplus in October left the
commercial banking system flush with dollars at a time when
corporate demand for the greenback was low.
Traders and analysts have differing views over how long the
pressure on the yuan to appreciate will last, but most agree
that a combination of market factors that draw dollars out of
the market, along with some form of regulatory intervention,
will bring the bull run to an end by early 2013.
(Editing by Sanjeev Miglani)
