Yuan weakens slightly as dollar index hits 3-year high
* PBOC midpoints tracks global dollar rally
* Spot yuan drops 0.09 pct to 6.1382 per dollar
* Yuan under pressure to weaken amid Fed QE jitters
SHANGHAI, July 8 (Reuters) - China's yuan edged lower on Monday after the dollar index hit a three-year high in global markets, but the weakening in the Chinese currency was capped by a relatively strong official midpoint, traders said. The People's Bank of China set the official fix at 6.1807 on Monday morning, only 0.03 percent softer than Friday's midpoint of 6.1790, tracking the global dollar direction but lagging far behind the greenback's rally. Spot yuan dropped by 0.09 percent to change hands at 6.1382 against the dollar by midday. "The (yuan's) exchange rate has temporarily stabilised because of an apparent hint from the PBOC to keep it relatively stable," said a dealer at a foreign bank in Shanghai. "But the yuan is under downward pressure as the dollar strengthens." The dollar index hit a fresh three-year high against a basket of major currencies on Monday as market expectations grew that the U.S. Federal Reserve will scale back stimulus as early as September following solid jobs growth. The yuan staged a two-month rally that began in early April, seeing the currency set repeated records against the dollar.
The onshore spot yuan market at a glance:
Item Current Previous Change PBOC midpoint 6.1807 6.179 -0.03% Spot yuan 6.1382 6.1326 -0.09% Divergence from -0.69%
Spot change ytd +1.50% Spot change since 2005 revaluation +34.84%
*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
Offshore spot yuan 6.1415 -0.05%* Offshore non-deliverable 6.2995 -1.89%**
*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)