Yuan edges lower, guided by PBOC midpoint; stability seen
SHANGHAI, Jan 25 (Reuters) - The Chinese yuan fell slightly on Friday morning after the central bank set a slightly weaker official midpoint to reflect a rise in the dollar index the day before, shrugging off expectations of greater capital inflows as the economy recovers. China's foreign exchange regulator said that Chinese corporates bought more yuan from banks than they sold in December, with yuan purchases exceeding dollar purchases by $54.3 billion. But traders said the news had little impact on trading, since these statistics tend to reflect what traders observe first-hand in the form of client flow. Instead, market players and regulators at the People's Bank of China (PBOC) are focused on following trends in the dollar index, which tracks the greenback against a basket of currencies dominated by the euro, they said. It rose 0.03 percent overnight. Spot yuan was trading at 6.2202 per dollar at midday, slightly weaker than Thursday's close of 6.2181. Trading volumes dropped to a $5.2 billion from a heavy $9.3 billion on Thursday morning. Traders expect the yuan to remain relatively stable from now until the Chinese New Year holiday, which begins on Feb 9.
The onshore spot yuan market at a glance:
Item Current Previous Change close (pct) PBOC midpoint 6.2805 6.2783 -0.04 Spot yuan 6.2202 6.2181 -0.03 Divergence from midpoint* +0.96 Spot change ytd +0.16 Spot change since 2005 +33.06
* The People's Bank of China (PBOC) allows the exchange rate to rise or fall 1 percent from the official midpoint rate it sets each morning.
OFFSHORE CNH MARKET
Offshore spot yuan fell at midday, with its premium
to the onshore spot narrowing and one-year non-deliverable
forwards trading at a discount to the midpoint.
The offshore yuan market at a glance:
Instrument Current Difference from onshore (pct) Offshore spot yuan 6.2165 +0.06Offshore 6.2998 -0.31
* The difference between offshore spot and the onshore spot
** Offshore one-year non-deliverable forwards (NDFs) reflect market expectations for appreciation or depreciation of PBOC's official midpoint.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> --Forces underpinning yuan rally to lose steam in 2013
--Offshore yuan premium returns as market bets on appreciation --Spot yuan has rallied strongly since late July 2012, and the PBOC is using its daily midpoint to restrain further appreciation. GRAPHIC: http://link.reuters.com/pyx74t --China's trade surplus surged in late 2012, but the surge was mainly due to weak imports rather than strong exports. GRAPHIC: http://link.reuters.com/qav68s --Corporate yuan purchases still exceed dollar purchases, but the gap is narrowing. Exporters are converting progressively smaller portions of their foreign exchange receipts into yuan. GRAPHIC: http://link.reuters.com/syx74t --Hot money outflows may be putting downward pressure on the yuan. GRAPHIC: http://link.reuters.com/saz74t --Despite relatively stable dollar/yuan exchange rate, the yuan is appreciating on a trade-weighted basis. GRAPHIC: http://link.reuters.com/sed74t
(Reporting by Lu Jianxin and Gabriel Wildau; Editing by Sanjeev Miglani)