SHANGHAI, Oct 22: China’s yuan edged down against the dollar on Tuesday after the central bank took advance of a global dollar rebound to pull the currency’s official midpoint back from a record high.
But robust dollar supply in the domestic market is likely to keep the yuan under pressure to appreciate in the medium-term.
Traders expect the yuan to move narrowly for now before resuming its climb later in the year to test the new psychological barrier of 6.0 per dollar.
‘Corporate dollar sales still dominate,’ said a trader at a Chinese state-owned bank in Shanghai.
‘As long as China continues to record big trade surpluses, keeping the market well supplied with dollars, the yuan will remain on its rising track.’
Near midday, the yuan fell to 6.0941 per dollar, slightly weaker than 6.0925 at the close on Monday. The currency set record intraday highs every day last week.
The People’s Bank of China (PBOC) fixed its yuan midpoint at 6.1395 on Tuesday, slightly weaker than Monday’s record high of 6.1352 as the dollar index rallied slightly after hit an eight-month low last Friday.
The PBOC, while recently tolerating a moderate yuan appreciation, has also stepped up intervention to prevent the currency from rising too much, too fast, traders said.
In a sign of such intervention, the central bank and Chinese commercial banks purchased 126.4 billion yuan ($20.73 billion) worth of foreign exchange on a net basis in September, increasing sharply from August’ s 27.3 billion yuan. (AGENCIES)
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