Yuan slips for 6th straight session; deep depreciation unlikely
* Yuan slips 0.03 pct on weaker c.bank guidance
* Spot rate now down 0.46 percent from record high
* Yuan's fall less severe than other EM currencies
* Govt signals preference for stability
SHANGHAI, June 27 (Reuters) - China's yuan fell versus the dollar for the sixth straight day on Thursday, after the central bank fixed its official midpoint slightly weaker amid a broader decline in emerging Asian currencies in recent weeks. The yuan has fallen steadily since early June but the extent of its depreciation has been limited. The key factor has been an apparent reversal in official support for appreciation that prevailed in April and May, traders said. Spot yuan was trading at 6.1490 versus the dollar at midday, down 0.03 percent from Wednesday's close of 6.1470 after the People's Bank of China (PBOC) fixed its official midpoint at 6.1797, slightly weaker than Wednesday's 6.1779. The PBOC 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, but has let it fall 0.46 percent since June 3 when it matched a record high of 6.1210, first hit on May 27. The recent reversal may be an effort by the PBOC to hold the yuan at least somewhat steady against other Asian currencies. The Korean won, Malaysian ringgit, Singapore dollar, and Philippine peso have all slipped against the dollar since mid-May. All have weakened more than the yuan's 0.46 percent drop since its record high on June 3. That means China's yuan has strengthened against the currencies of its neighbours. Capital has exited from emerging markets in recent weeks amid concerns that the Federal Reserve may taper its bond buying.
STABILITY EXPECTED In a sign that Beijing will remain cautious towards the yuan's value after recent market turmoil, the State Council, or the cabinet, said on Wednesday that China will maintain the stability and continuity of its policies and make efforts to anchor market expectations. The statement came after tight liquidity in China's money markets since early June and a plunge in the domestic stock market this week sparked worries over the health of the world's second-largest economy and its financial system. "The State Council's statement appears to have given fresh emphasis on the importance of managing market expectations," said a trader at Chinese commercial bank in Shanghai. "Although a lack of major political events permits the PBOC to let the yuan weaken slightly in the near term, it is likely to stick to the gradualist approach more strictly, judging from the latest developments in Chinese markets," he said.
The onshore spot yuan market at a glance:
Item Current Previous Change (pct) PBOC midpoint 6.1797 6.1779 -0.03 Spot yuan 6.1490 6.1470 -0.03
Divergence from midpoint* -0.50 (pct)
Spot change ytd +1.32 Spot change since 2005 revaluation +34.60
*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 the 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 6.1480 +0.02* Offshore non-deliverable 6.3060 -2.00**
*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)