Yuan rises to near two-week high, but dollar demand robust
* Yuan rises to 2-week high in early afternoon
* C.bank sets record-high midpoint at 6.1598 pct
* Traders see rising dollar demand
* Data shows capital inflows slowing
SHANGHAI, June 14 (Reuters) - China's yuan hit its highest level in almost two weeks on Monday after the central bank set its daily midpoint at a record high, but traders said dollar demand is strong and expect little further appreciation in the near term. The People's Bank of China (PBOC) fixed its midpoint at 6.1598 per dollar on Monday, below the 6.16 psychological barrier and 0.01 percent stronger than Friday's previous record high. Spot yuan changed hands at high of 6.1239 in early afternoon, up 0.1 percent from Friday's close. The dollar/yuan rate was 0.58 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. "Big banks started to buy dollars today," said a dealer at a Chinese bank in Shanghai. "The impact of the midpoint is weakening for now, with the demand for dollars being the key reason." Indeed, figures from the State Administration of Foreign Exchange (SAFE) on Monday showed that firms bought $17.2 billion more worth of yuan from banks than they bought in foreign exchange in May. That marked a sharp decrease from $34.2 billion in surplus yuan purchases in April. That matched separate but closely related data released by the central bank on Friday afternoon, which showed that Chinese banks, including the central bank, purchased a net 66.9 billion yuan worth of foreign exchange in May. That was also down sharply from 294.4 billion yuan in April. Both figures indicate that foreign exchange inflows and demand for the into China and demand for the Chinese currency have slowed sharply compared to earlier this year.
The onshore spot yuan market at a glance:
Item Current Previous Change (pct) PBOC midpoint 6.1598 6.1607 0.01 Spot yuan 6.1243 6.1308 0.11 Divergence from -0.55
Spot change ytd 1.71 Spot change since 2005 revaluation 35.11
*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 6.1280 -0.06 Offshore non-deliverable 6.2585 -1.58
*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)