Yuan ends down for 3rd day, slight weakening expected
* Yuan closes slightly lower on by weaker c.bank fixing
* But yuan decline small compared other EM currencies
* Less dollar selling onshore as capital inflows slow
* Yuan is down 0.4 pct since record high on June 3
SHANGHAI, June 24 (Reuters) - The yuan closed lower versus the dollar on Monday for the third straight session, extending a recent mild downtrend amid slowing capital inflows into China, traders said. Dollar sales that had helped push up the Chinese currency in April and May are ebbing, which may herald a slight yuan weakening in coming weeks, traders said. Spot yuan closed at 6.1451 versus the dollar, down 0.2 percent from Friday's close after the People's Bank of China (PBOC) fixed a weaker official midpoint of 6.1807, compared with Friday's 6.1766. The PBOC has guided the yuan to fall slowly but steadily by a total of 0.4 percent since the currency hit a record high of 6.1210 on May 27 and again on June 3. Still, there is little indication that the yuan is facing the same downward pressure as other emerging Asian currencies. The Malaysian ringgit, Singapore dollar, Philippine peso and Korean won have all fallen steeply since mid-May, when the market began to anticipate that the Federal Reserve may soon begin to taper its bond buying program. A rally in the dollar index in recent days has given the Chinese central bank an easy excuse to let the yuan weaken slightly, but the yuan's movements since the start of the second quarter of this year has largely independent of global dollar performance, traders said. "Signs of less capital inflows, plus the PBOC's guidance, have reversed a yuan appreciation trend," said a trader at a Chinese commercial bank in Shanghai. "With no major market-moving news related to the yuan around the corner, the easing of dollar sales in the market points in the direction of a slight yuan weakening in coming weeks," he said. The weaker guidance came after the central bank guided the yuan stronger from early April to late May, ahead of a slew of major political events, including a G20 meeting and Chinese President Xi Jinping's visit to the United States.
The onshore spot yuan market at a glance:
Item Current Previous Change (pct) PBOC midpoint 6.1807 6.1766 -0.07 Spot yuan 6.1451 6.1342 -0.18
Divergence from midpoint* -0.58 (pct)
Spot change ytd +1.39 Spot change since 2005 revaluation +34.68
*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 6.1414 +0.06* Offshore non-deliverable 6.3150 -2.13**
*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)