China’s yuan edges up after record-high midpoint fixing

 

HONG KONG, Sept 16:  China’s yuan edged up slightly against the dollar on Monday after the central bank set a record high midpoint to reflect an overnight decline of the U.S. Dollar, boosting expectations that the currency may gain for the third consecutive month.

The yuan has risen 1.8 percent so far this year, with  mos to the gains made in April and June, while most other  emerging market currencies have suffered falls,

Spot yuan traded at 6.1178 per dollar near midday, up  0.02 percent from the previous close. The People’s Bank of  China (PBOC) fixed the yuan’s midpoint at 6.1554, or 0.04 percent firmer than Friday’s 6.1578.

Traders said strong economic data from China should  support the yuan, but it was likely to stay range-bound  until the U.S. Federal Reserve announces its plan to taper  bond purchases. The Fed’s key policy setting committee  meets on Tuesday and Wednesday.

‘I doubt whether the yuan spot could breach 6.11 in the coming two weeks,’ said a trader at a Chinese bank in  Shanghai.

Some traders suspected the PBOC might be intervening in  the spot market to prevent its currency from rising too fast, in order to gradually achieve its aim of narrowing  the gap between yuan midpoint fixing and spot rate.

The world’s second-largest economy’s strong economic indicators in August and bright outlook have made several investment banks, including Deustche Bank and UBS, upgrade forecasts for GDP growth recently.

China should hit its growth target of 7.5 percent this  year, World Bank Group President Jim Yong Kim said on Sunday.

News that Lawrence Summers, perceived as relatively  hawkish and less in favour of quantitative easing, has pulled out of the Fed race, would be genrally supportive for Asian currencies, Credit Agricole said in a note sent to  clients.

The onshore spot yuan market at a glance:

Item                        Current  Previous  Change (pct) PBOC midpoint               6.1554   6.1578    0.04% Spot yuan                   6.1178   6.1188    0.02% Divergence from midpoint*   -0.61%             (pct)

Spot change ytd                                1.84% Spot change since 2005 revaluation             35.29%

 

*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 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         6.1116    0.10%

Offshore non-deliverable   6.203     -0.77%

Forwards

 

*Premium for offshore spot over onshore  **Figure reflects difference from PBOC’s official midpoint, since non-deliverable forwards are settled against the  midpoint.

 

(AGENCIES)