SHANGHAI, May 6: The yuan edged up against the dollar on Friday on yuan demand from banks and their corporate clients, shrugging off the softest midpoint set by the central bank in a month, traders said.
If the yuan closes around the midday level, it would have weakened 0.4 percent from the week before.
The People’s Bank of China weakened the midpoint rate for a third straight day to 6.5202 per dollar prior to market open, 0.11 percent softer than the previous fix 6.5128, as the dollar index gained 0.6 percent against a basket of major currencies overnight.
The spot yuan opened at 6.5030 per dollar. The opening rate was relatively strong as one Chinese policy bank was selling dollars, and did not reflect market demand, traders said.
The spot rate then fluctuated and was changing hands at 6.5059 by midday, 0.03 percent firmer than the previous close and 143 pips stronger than the midpoint.
“The gap (between the spot and midpoint) is rather large,” said a trader at a Chinese commercial bank. “My guess is the market doesn’t believe the yuan should be as weak as the midpoint indicates.”
The offshore yuan was trading 0.19 percent softer than the onshore spot at 6.5183 per dollar. Offshore one-year non-deliverable forwards contracts , considered the best available proxy for forward-looking market expectations of the yuan’s value, traded at 6.6873, or 2.50 percent weaker than the midpoint. The onshore yuan firmed 0.3 percent against the euro by midday at 7.4174. It softened 0.2 percent against the Japanese yen, hovering around 6.0746 to 100 yen. (AGENCIES)
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