Yuan down slightly on c.bank guidance; NDFs fall sharply on growth worries
* Yuan 0.03 pct weaker at 6.1289/dlr in late morning
* C.bank set midpoint only 0.03 pct weaker 6.1698
* Dollar index jumps 1 pct overnight
* Yuan demand remains strong
SHANGHAI, June 20 (Reuters) - China's yuan edged down on Thursday after the central bank ignored gains in the dollar against other currencies to set its dollar-yuan midpoint, signalling a preference for stability. The People's Bank of China (PBOC) fixed its midpoint at 6.1698 per dollar on Thursday, only 0.03 percent weaker than Wednesday's 6.1677, despite an overnight jump of nearly 1 percent in the dollar index. "According to the central bank's past operating style, it would be natural for it to set the midpoint above 6.17 after dollar jump, so it (today's midpoint) perhaps indicated the central bank's intention to keep the yuan in a narrow range," said a dealer at a city commercial bank in Shanghai. Spot yuan changed hands at 6.1289 in late morning, 0.03 percent softer than Wednesday's close. But as they have in recent days, dealers continue to report resilient yuan demand, and the currency remains only 0.14 percent weaker than its all-time high of 6.1210 hit on July 3. Some dealers said they yuan could fall slightly next week 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 onshore spot yuan market at a glance:
Item Current Previous Change (pct) PBOC midpoint 6.1698 6.1677 -0.03 Spot yuan 6.1289 6.1269 -0.03
Divergence from midpoint* -0.66 (pct)
Spot change ytd +1.65 Spot change since 2005 revaluation +35.04
*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 Yuan non-deliverable forwards fell sharply on Thursday, as a preliminary survey showed weak factory activity weakening to a nine-month low. The latest sign of a slowdown in the Chinese economy raised expectations that onshore spot yuan may weaken over the next year.
The offshore yuan market at a glance:
Instrument Current Difference from onshore
Offshore spot yuan 6.1295 -0.01* Offshore non-deliverable 6.2935 -1.97*
*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 Kim Coghill)