Yuan edges up on corporate dollar sales, seen in narrow range
* Dollar sales are sign of continuing FX inflows
* PBOC midpoint gives impression yuan to stay stable
* Yuan seen moving between 6.13/14 vs dlr in near term
* Govt policy guidelines support PBOC stance
SHANGHAI, July 31 (Reuters) - The Chinese yuan edged higher on Wednesday as traders reported corporate dollar selling, an indication that foreign exchange keeps flowing into China in spite of recent data showing signs of capital outflows. Spot yuan changed hands at 6.1308 per dollar near midday, 0.01 percent stronger than Tueday's close of 6.1317, after the People's Bank of China (PBOC) set its official midpoint at 6.1788, or 0.03 percent weaker than Tuesday's 6.1770. Traders said recent midpoint settings have not signalled direction for the yuan/dollar rate, and they predict the yuan will continue to move mainly in a tight range between 6.13/14 in near term. Recent statements by senior officials suggest the government is setting a floor for China's economic growth rate. But traders said the small-scale stimulus apparently under consideration likely will have no immediate impact on the yuan's exchange rate, which has largely moved sideways since early June. "The yuan could not fall sharply, since it is still supported by decent dollar supply in the market," said a trader at a European bank in Shanghai. "But the midpoint has given a signal of stability, so corporates have sold dollars largely in line with the PBOC's rates. The market has no direction for now." China's politburo, the country's top decision-making body, pledged on Tuesday to keep economic growth stable in the second half by fine-tuning policies, while pressing ahead with reforms and restructuring. On Wednesday, the top economic planning agency said China should continue to implement prudent monetary policy and keep liquidity conditions relatively ample to boost growth.
The world's second-largest economy expanded at an annual rate of 7.5 percent in the second quarter, down from 7.7 percent in the first quarter.
The onshore spot yuan market at a glance:
Item Current Previous Change (pct) PBOC midpoint 6.1788 6.1770 -0.03 Spot yuan 6.1308 6.1317 +0.01
Divergence from midpoint* -0.78 (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 6.1352 -0.07* Offshore non-deliverable 6.2970 -1.88**
*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)