China's yuan steadies at one-week high, PMI checks gains
HONG KONG, July 24 (Reuters) - The Chinese yuan steadied at a one-week high against the U.S. dollar on Wednesday following a stronger daily fixing, but weak manufacturing data and tighter money market conditions checked gains. 6.1367 per dollar, slightly above Tuesday's close of 6.1374. Activity in China's vast manufacturing sector slowed to an 11-month low in July as new orders faltered and the job market weakened, a preliminary survey showed on Wednesday, suggesting the world's second-largest economy was still losing momentum.
The effects of the weak data rippled across Asian stock markets and punctured the early signs of a rally in Chinese stocks on Tuesday, weighing on the currency. Increasing tightness in the money markets as evident from an uptick in its benchmark seven-day bond repurchase agreement and a higher cutoff yield at a bond auction also kept the yuan's gains in check. 1/8ID: nB9N0EH01U 3/8 But while expectations of renminbi weakness have grown amid recent evidence of capital outflows, a series of strong fixings narrow channel. On Wednesday, the PBOC fixed the daily yuan midpoint stronger versus the U.S. dollar for a third consecutive day at 6.1695. "The market is still divided on whether the yuan will appreciate or depreciate for the rest of the year, making trading ranges narrow between 6.12 and 6.14 recently," said a currency trader in Shanghai. In the currency forwards market, one-month and one-year rates stabilised after edging higher for the past two days, indicating the bulk of the dividend payments by local banks may be over.
The onshore spot yuan market at a glance:
Item Current Previous Change PBOC midpoint 6.1695 6.1702 +0.01% Spot yuan 6.1367 6.1374 +0.01%
Divergence from midpoint* -0.53%
Spot change ytd +1.53% Spot change +34.87%
since 2005 revaluation
*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 Offshore markets were relatively stable with the daily offshore yuan fixing at a slightly higher rate than Tuesday,
reflecting a drop in the U.S. dollar index . The spread
between the offshore and onshore yuan remained negligible indicating appreciation expectations of the Chinese currency have faded.
The offshore yuan market at a glance:
Instrument Current Difference Offshore spot yuan 6.1352 -0.02%* Offshore non-deliverable 6.272 -1.63%**
*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
(Additional reporting by Michelle Chen; Editing by Jacqueline Wong)