SHANGHAI, May 2:China’s central bank set the yuan’s midpoint at a historical high for a third consecutive trading day on Wednesday, as U.S. And Chinese negotiators prepare for the two-day Security and Economic Dialogue (S&ED) that opens in Beijing on Thursday.
The People’s Bank of China (PBOC) set a midpoint of 6.2670 per dollar, 0.19 percent higher than Friday’s fixing. Domestic markets were closed for a public holiday on Monday and Tuesday.
Spot yuan opened 0.53 percent below the midpoint at 6.3000, the first time the currency has opened trade more than 0.5 percent away from the PBOC’s fix, and traded in this range throughout the morning.
The PBOC allowed the yuan to begin trading up to 1 percent away from the midpoint, an increase from 0.5 percent, on April 16, but spot prices have flattened out and have remained range-bound between 6.30 and 6.31 since mid-March.
An aggressive midpoint fixing on Friday caused the yuan price to test the widened trading band for the first time when it refused to follow the midpoint into stronger territory. Spot yuan touched an intraday low of 6.3124, 0.54 percent weaker than the day’s fix of 6.2787.
A stronger fixing on Wednesday also failed to inspire traders to move spot prices closer to the fixing.
‘The high midpoint setting is completely due to the S&ED,’ said a trader at one of the big four Chinese banks in Shanghai. ‘Most of our big customers are still buying dollars at the 6.3 level, which supports the dollar against the yuan.’
He added that the yuan fixing had strengthened despite the fact that the dollar index had gained in overnight trading. The PBOC usually moves the midpoint in tandem with the dollar.
(AGENCIES)
Trending Now
E-Paper
Follow our WhatsApp channel