SHANGHAI, Nov 8:
China’s yuan edged higher against the dollar on Friday after the government posted better-than-expected exports and trade surplus data, giving an explanation for what traders have repeatedly said was a recent abundance of dollars in the domestic market.
China’s export growth rebounded by 5.6 percent in October from a year earlier, beating market expectations for a 3.2 percent rise and adding to a run of indicators suggesting that the economy has found its footing as Beijing prepares to lay out its reform agenda for the next decade.
Imports rose 7.6 percent against forecasts of an 8.5 percent rise, leaving the trade surplus at $31.1 billion compared with forecasts of $23.9 billion.
‘The data confirms why the market has recently seen an abundance of dollar supply, that keeps the yuan under pressure to appreciate,’ said a dealer at a European bank in Shanghai.
‘But the market is always dominated by state-owned banks, who are typically dollar buyers in the market to absorb extra dollar supply, believed on behalf of the monetary authorities. That has capped the yuan’s gains.’
Spot yuan traded at 6.0903 per dollar at midday, up 0.01 percent from Thursday’s close of 6.0908.
The People’s Bank of China (PBOC) fixed its midpoint at 6.1355 on Friday, or 0.15 percent stronger than Thursday’s midpoint of 6.1450.
However, the PBOC has generally set a slew of weaker midpoints recently, guiding the Chinese currency away from the string of all-time highs touched in mid-October.
As the yuan’s movements are mainly guided by the central bank and influenced by dollar purchases of state-owned banks, traders expect the yuan to trade narrowly around 6.1 per dollar in the coming weeks, unless the PBOC changes its recent stance.
A Reuters poll on Thursday showed analysts expect the yuan will continue to hit record highs, rising slowly to 6.08 in six months and 6.03 by October next year.
Those predictions are slightly better than last month and signal expectations that the People’s Bank of China will gradually widen its trading band as the economy improves.
(AGENCIES)
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