SHANGHAI, Mar 19: China’s yuan stayed almost unchanged by midday on Tuesday as dealers said dollar supply and demand was roughly in balance.
The Ministry of Commerce reported that China’s foreign direct investment (FDI) inflows fell 1.35 percent in the first two months of 2013 from a year earlier, extending a run of falls triggered by a drop in investor confidence in emerging markets as global economic growth has slipped.
‘Trading was not affected by the FDI data, and the balance between dollar supply and demand kept the yuan rate stable,’ said a dealer at a European bank in Shanghai.
‘The market was also cautious in terms of bidding yuan up or down. Participants are looking for signs from the central bank to reveal its attitude towards the yuan’s future value.’
Spot yuan changed hands at 6.2160 per dollar at midday, nearly flat compared with Monday’s close of 6.2158. The People’s Bank of China (PBOC) gave the exchange rate more room to weaken by softening its official midpoint by 0.03 percent.
Volume was sluggish at $4.6 billion on Tuesday morning, although stronger than Monday morning’s $3.3 billion.
The PBOC appears to be taking a wait-and-see approach in terms of a response to the weakening of Asian currencies, notably the Japanese yen.
But if the yen and other Asian currencies fall much further, some traders predict the PBOC could force the yuan weaker by as much as two percent.
The onshore spot yuan market at a glance:
Item Current Previous Change
(pct)
PBOC midpoint 6.2758 6.2741 -0.03
Spot yuan 6.2160 6.2158 0.00
Divergence from -0.95
Midpoint*
Spot change ytd +0.23
Spot change since 2005 revaluation +33.15
*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.
(AGENCIES)
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