Yuan edges up vs dollar, stability seen persisting for weeks
* PBOC sets official midpoint slightly higher
* Govt seen maintaining yuan stability while growth weak
* Yuan may move mainly between 6.13/14 in near term
SHANGHAI, July 29 (Reuters) - The Chinese yuan edged higher against the dollar on Monday after the central bank set a slightly stronger midpoint, as traders say Beijing is moving to keep the exchange rage stable. Spot yuan changed hands at 6.1309 per dollar at midday, 0.01 percent firmer than Friday's close of 6.1316, after the People's Bank of China set its official midpoint at 6.1705, or 0.02 percent stronger than Friday's 6.1720. "The government is increasingly interested in keeping the exchange rate relatively stable given economic and market uncertainties," a dealer at a European bank in Shanghai said. He and other traders expect that in the absence of signs of substantial economic turnaround, in the near term the yuan will remain in a tight range between 6.13 and 6.14 per dollar. In the latest sign of a slowing economy, activity in China's vast manufacturing sector slipped to an 11-month low in July. The flash HSBC/Markit Purchasing Managers' Index fell to 47.7 from June's final reading of 48.2, a third straight month below the watershed 50 line which divides expansion from contraction and the weakest since August 2012.
The onshore spot yuan market at a glance:
Item Current Previous Change (pct) PBOC midpoint 6.1705 6.1720 +0.02 Spot yuan 6.1309 6.1316 +0.01
Divergence from midpoint* -0.64 (pct)
Spot change ytd +1.62 Spot change since 2005 revaluation +35.00
*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 6.1338 -0.05* Offshore non-deliverable 6.2790 -1.73**
*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 - CHINA MONEY-Faltering exports could mean flat yuan or worse in H2 - 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 Richard Borsuk)