HONG KONG, Oct 30: China’s yuan fell to one-week low against the dollar on Wednesday, guided by a weaker yuan midpoint the central bank set for the third consecutive day to reflect a rebound in dollar index.
But traders said upside pressure on the Chinese currency remains given ample dollar supply from corporates in the domestic market, especially when the spread between onshore and offshore yuan spots is seen widening.
Traders say the People’s Bank of China (PBOC) hopes to keep the yuan stable in the run-up to the Communist Party’s third plenum meeting to be held from Nov.9 to 12, and the yuan will have support at 6.10.
‘Corporate demand to sell dollars is still strong,’ said a trader at a Chinese state-owned bank in Beijing.
‘The gap of the two yuan spots has widened, and that is triggering more dollar sales in the onshore market.’
Spot yuan traded at 6.0923 near midday, down 0.03 percent from Tuesday’s close of 6.0902. The PBOC fixed its official midpoint at 6.1412, down 0.06 percent from the previous day’s 6.1373.
The yuan has fallen for three straight days this week by a total of almost 100 pips, but traders are expecting a fresh round of appreciation after the third plenum meeting where material economic reforms will be addressed.
The meeting ‘must be a new historical beginning that comprehensively deepens reforms,’ Xinhua said on Tuesday, citing a meeting of the elite Politburo.
The world’s second-largest economy is regaining momentum and remains a bright spot among global economies, which continues to attract capital inflows.
China’s central bank purchased about 270 billion yuan ($44.33 billion) worth of foreign exchange on a net basis in September, according to statistics the PBOC released on Tuesday.
(agencies)
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