* PBOC lets midpoint take pause in rise after record high
* Controls in trading show intention to keep yuan stable
* Reforms appear at crossroad on Asian currency falls
By Lu Jianxin and Pete Sweeney
SHANGHAI, Sept 13 (Reuters) – China’s yuan was little
changed against the dollar on Friday after the central bank set
its official midpoint marginally weaker but remaining near a
record high set a day earlier.
The People’s Bank of China (PBOC) has let the midpoint
fixing rise since the start of this week, but has also
intervened to hold back spot prices. Traders say that may signal
a desire to modify its forex management strategy as the central
bank prepares for the next round of liberalisation.
The PBOC set its midpoint at 6.1578 versus the
dollar on Friday, three pips weaker than Thursday’s 6.1575,
which was the fixing’s highest since the domestic foreign
exchange market was established in 1994.
But in trading, the central bank was suspected of
intervening to curb expectations of yuan appreciation, keeping
the currency slightly weaker for most of the session on Friday.
Spot yuan changed hands at 6.1184 per dollar at
midday, almost unchanged from Thursday’s close of 6.1180.
Traders said the PBOC could be using a stronger midpoint to
pave the way for a potential introduction of more two-way
movement in the market in future.
However, they said the central bank may hesitate to
implement changes immediately with Asian currencies hit recently
by fund outflows on worries over a tapering in U.S. monetary
stimulus and some countries’ poor economic fundamentals.
“Generally weakening Asian currencies this year appears to
have delayed China’s yuan reforms,” said a dealer at a European
bank in Shanghai.
“The PBOC’s signalled it would tolerate a stronger yuan by
permitting the spot price to appreciate in April and May, but it
now appears the market is at a crossroads given domestic
resistance to more rises amid falls in other Asian currencies.”
The yuan has gained 1.83 percent so far this year, bucking
the weakening trend of other emerging market currencies.
However, the bulk of the yuan’s gains, or about 1.5 percent, was
recorded in April and May.
The onshore spot yuan market at a glance:
Item Current Previous Change (pct)
PBOC midpoint 6.1578 6.1575 0.00
Spot yuan 6.1184 6.1180 -0.01
Divergence from midpoint* -0.64
(pct)
Spot change ytd +1.83
Spot change since 2005 revaluation +35.27
*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 1 percent from the official midpoint rate it sets
each morning.
OFFSHORE CNH MARKET
The offshore yuan market at a glance
Instrument Current Difference from
onshore (pct)
Offshore spot yuan 6.1112 +0.12*
Offshore non-deliverable 6.2100 -0.84**
forwards
*Premium for offshore spot over onshore
**Figure reflects difference from PBOC’s official midpoint,
since non-deliverable forwards are settled against the midpoint.
.
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RECENT DEVELOPMENTS
– Yuan rally starts to fade as capital inflows to China slow
– ANALYSIS-Bullish yuan herd leaves China fundamentals in
the dust
– Currency war or no, Beijing doesn’t want Asia to take
stable yuan for granted
– China opens new front in money war as yuan speculation
distorts export data
KEY DATA POINTS
– Gap between PBOC midpoint and spot rate is narrowing.
GRAPHIC: http://link.reuters.com/qyx74t
– China’s trade surpluses mainly driven by weak imports
rather than strong exports. GRAPHIC: http://link.reuters.com/qav68s
– Corporate FX purchases in July show reduction in yuan
appreciation expectations. GRAPHIC: http://link.reuters.com/tyx74t
– Hot money outflows reach record high in July GRAPHIC: http://link.reuters.com/saz74t
– Despite relatively stable dollar/yuan exchange rate, the
yuan is appreciating on a trade-weighted basis. GRAPHIC: http://link.reuters.com/sed74t
(Editing by Jacqueline Wong)
