China's yuan slips on c.bank guidance, slight rise seen ahead
* PBOC sets slighter weak midpoint on dollar strength
* Dollar supply continues to outpace demand
* Yuan could rise to 6.11/dollar in coming days - traders
* Currency may remain largely stable in medium term
SHANGHAI, Sept 3 (Reuters) - China's yuan edged lower against the dollar on Tuesday after the central bank set a slightly weaker midpoint to reflect a dollar rally in global markets, traders said. But the domestic market continued seeing an abundant dollar supply, with corporates selling them for now, indicating the Chinese currency may still have some potential to rise slightly in coming days, they said. Spot yuan changed hands at 6.1205 per dollar at midday, down 0.01 percent from the previous close, after the People's Bank of China (PBOC) set its midpoint at 6.1718, or 0.03 percent weaker than Monday's 6.1702. The yuan could rise to 6.11 against the dollar this week or early next week before falling back slightly, traders said. It was likely to remain largely stable in the medium term, moving in a narrow range between 6.11 and 6.13, with good dollar supply offset by pressure from depreciation of other Asian currencies, they said. The yuan has gained 1.79 percent far this year, bucking the weakening trend of emerging market currencies. However, the bulk of the yuan's gains were in April and May.
The onshore spot yuan market at a glance:
Item Current Previous Change (pct) PBOC midpoint 6.1718 6.1702 -0.03 Spot yuan 6.1205 6.1196 -0.01
Divergence from midpoint* -0.83 (pct)
Spot change ytd +1.79 Spot change since 2005 revaluation +35.23
*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 6.1148 +0.09* Offshore non-deliverable 6.2320 -0.97**
*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 - PBOC's FX assets dropped in June, pointing to possible capital outflows: GRAPHIC: http://link.reuters.com/het22v - 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)