Yuan ends slightly up, demand for it seen resilient
* Yuan gains slightly to close 6.1269/dlr
* Dealers say yuan demand remains strong
* But dollar demand seen rising on dividend payments
* Dealers don't expect depreciation
(Updates to close) SHANGHAI, June 19 (Reuters) - China's yuan ended slightly stronger on Wednesday, despite data showing declining capital inflows, as dealers reported continued strong demand for the currency. Spot yuan closed at 6.1269 per dollar, 0.03 percent stronger than Tuesday's close. The gain in the spot rate contrasted with the central bank's daily midpoint, which was set at 6.1677 on Wednesday, 0.04 percent weaker than Tuesday's fix. Data out Wednesday showed that capital inflows in the first quarter were smaller than originally believed. The State Administration of Foreign Exchange (SAFE) revised down China's first-quarter current account surplus to $47.6 billion from $55.2 billion, while the capital and financial account surplus was changed to $90.1 billion from $101.8 billion. The dollar/yuan rate was 0.66 below the midpoint in the early afternoon. While this gap was still smaller than one of more than 0.9 percent that persisted most days between the fourth quarter of 2012 and late last month, it has widened again after narrowing to as little as 0.3 percent last week. That indicates that some appreciation pressure has re-emerged after fading last week. "Overall, the market is still demanding yuan," said a dealer at a major state-owned bank in Shanghai. He and other dealers said the yuan is likely to move sideways in the near term, as some corporate clients listed in Hong Kong or other markets will need to purchase foreign currency to offer dividends around end-June and early July. That will offset some of the current yuan demand. "The recent level is quite stable and there is still no expectation of yuan depreciation," the state-owned bank dealer said. "If there is no demand for dividends and position adjustment still expect further rises around end-July and August," he said.
The onshore spot yuan market at a glance:
Item Current Previous Change (pct) PBOC midpoint 6.1677 6.1651 -0.04 Spot yuan 6.1269 6.1285 +0.03
Divergence from midpoint* -0.66 (pct)
Spot change ytd +1.69 Spot change since 2005 revaluation +35.08
*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 -0.02* Offshore non-deliverable 6.2760 -1.73**
*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 - Yuan rally starts to fade as capital inflows to China slow
- 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 - China opens new front in money war as yuan speculation distorts export data
KEY DATA POINTS - Gap between PBOC midpoint and spot rate is narrowing. GRAPHIC: http://link.reuters.com/qyx74t - China's trade surpluses mainly driven by weak imports rather than strong exports. GRAPHIC: http://link.reuters.com/qav68s - Corporate FX purchases in May show reduction in yuan appreciation expectations. GRAPHIC: http://link.reuters.com/tyx74t - Hot money inflows turn to outflows in May 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
(Editing by Jacqueline Wong)