SHANGHAI, May 15: China’s yuan edged lower on Wednesday after the central bank set its official midpoint slightly weaker to reflect a rally in the dollar index overnight to a near 10-month high, traders said.
Spot yuan was trading at 6.1461 against the dollar at midday, slipping from 6.1428 at the close on Tuesday.
The People’s Bank of China (PBOC) fixed its midpoint at 6.2070 before trade began, mildly weaker than Tuesday’s 6.2035.
Before a consolidation ushered in last week on the back of a strong dollar rally in global markets, the yuan had hit a slew of record highs since early April, guided by the central bank, in a sign that China is moving towards a more flexible foreign exchange regime, traders say.
‘The PBOC’s new stance to let the yuan trade more freely in line with dollar demand and supply in the market, together with an abundance of dollars in the market means the yuan’s recent strength will remain intact in the near term,’ said a trader at a foreign bank in Shanghai.
‘In the longer term, however, a more flexible exchange rate will mean the central bank could also let the yuan depreciate similarly as it permits it to appreciate for now.’
China has witnessed strong capital inflows this year, with corporates more willing to sell dollars as soon as they get hold of them also because of the yuan’s unexpected strength, traders said.
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