SHANGHAI, Mar 1: The yuan fell a touch against the dollar on Friday after the People’s Bank of China (PBOC) set its daily midpoint slightly weaker to reflect an overnight dollar rise in global markets.
Spot yuan was trading at 6.2233 per dollar near midday, down 0.03 percent from Thursday’s close, after the PBOC set its daily midpoint 0.03 percent weaker as well.
Trading volume was unchanged from Thursday morning at a thin $4.7 billion.
Despite the yuan’s slight weakening, traders said the domestic market was for now still seeing some pressure for the currency to remain strong, partly due to demand caused by the PBOC’s tight liquidity policy in China’s money markets.
The central bank drained a record weekly 910 billion yuan ($146 billion) from the money markets last week and refused to inject liquidity this week despite widespread expectations and even as China’s benchmark money rate has surged 152 basis points from Feb. 18 to 4.43 percent by midday on Friday.
‘The foreign exchange market feels the heat of a liquidity squeeze in the money markets,’ said a trader at an Asian bank in Shanghai. ‘Tight yuan liquidity keeps the yuan under moderate appreciation pressure.’
Traders expect the yuan to move between 6.22 and 6.24 in coming weeks.
Data issued on Friday showed growth in Chinese factories cooled in February to a five-month low after domestic and foreign demand slackened, but the data, largely in line with expectations, had no impact on yuan trading, traders said.
(AGENCIES)
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