Yuan edges up amid lingering economy worries, ignores record midpoint
* Yuan closes up slightly at 6.1308/dollar
* C.bank sets another record-high midpoint
* Gap between spot rate and midpoint remains narrow
* Traders see little room for further yuan gains
SHANGHAI, June 14 (Reuters) - China's yuan closed slightly higher on Friday, despite another record-high midpoint setting the currency's recent rally is nearly over. The People's Bank of China fixed the midpoint at 6.1607 per dollar, up 0.01 percent from Thursday's record high. Spot yuan finished at 6.1308, up 0.06 percent from the last close. The dollar/yuan rate was only 0.49 below the midpoint, compared with a gap of more than 0.9 percent that persisted on most days between the fourth quarter of 2012 and last week. The central bank has used the midpoint to guide the yuan to multiple record highs since early April, as the government appears to be laying groundwork for a more flexible exchange-rate regime. "The dollar dropped overnight, so the central bank followed it to set a high midpoint," said a dealer at a city commercial bank in Shanghai. "But the spot yuan price shows that market players are still hesitant about bidding the yuan higher." Dealers said they believe the yuan has little potential to rise further in the near term, as the weak Chinese economy cannot support a jump in the currency. "Market confidence has been hurt by economic data, especially the export data," the city bank dealer said. In May, China's exports rose 1 percent from a year earlier, much lower than the market expectation of 7.3 percent.
The onshore spot yuan market at a glance:
Item Current Previous Change (pct) PBOC midpoint 6.1607 6.1612 +0.01% Spot yuan 6.1308 6.1344 +0.06% Divergence from -0.49%
Spot change ytd +1.62% Spot change since 2005 revaluation +35.00%
*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.
OFFSHORE CNH MARKET
The offshore yuan market at a glance:
Instrument Current Difference from onshore Offshore spot yuan 6.1320 -0.02%*
Offshore non-deliverable 6.2680 -1.74%**
*Premium for offshore spot over onshore
**Figure reflects difference from PBOC's official midpoint, since non-deliverable forwards are settled against the midpoint. .
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> RECENT DEVELOPMENTS - China opens new front in money war as yuan speculation distorts export data - ANALYSIS-Bullish yuan herd leaves China fundamentals in the dust - Currency war or no, Beijing doesn't want Asia to take stable yuan for granted
KEY DATA POINTS - PBOC is using its daily midpoint to restrain appreciation. GRAPHIC: http://link.reuters.com/pyx74t - China's trade surpluses mainly driven by weak imports rather than strong exports. GRAPHIC: http://link.reuters.com/qav68s - Corporate yuan purchases reflect heightened yuan appreciation expectations or at least a reduction in long dollar positions. GRAPHIC: http://link.reuters.com/syx74t
- Hot money inflows return with a vengeance GRAPHIC: http://link.reuters.com/raz74t - Despite relatively stable dollar/yuan exchange rate, the yuan is appreciating on a trade-weighted basis. GRAPHIC: http://link.reuters.com/sed74t
(Editing by Kim Coghill)