China's yuan edges up on PBOC guidance, upside limited
* PBOC sets slightly stronger midpoint on global dollar fall
* C.bank seen guiding yuan in response to dollar movements
* Yuan supported by China's improving economy
* But under pressure from Asian currency depreciation
SHANGHAI, Sept 5 (Reuters) - China's yuan edged up against the dollar on Thursday after the central bank set a slightly firmer midpoint to reflect an overnight fall in the dollar index . Spot yuan changed hands at 6.1193 per dollar near midday, up 0.01 percent from the previous close, after the People's Bank of China (PBOC) set its midpoint at 6.1696, or 0.05 percent stronger than Wednesday's 6.1729. Traders said the central bank appears to be guiding the yuan with greater reference to the dollar's global movements recently. Support for the Chinese currency from improvement in the macroeconomy, however, has been offset by a recent depreciation in other Asian currencies. "It appears the PBOC has become more conservative recently, letting the yuan move in response to the dollar's movements but confining its rises and falls within a tight range," said a dealer at a Chinese commercial bank in Shanghai. "If it sticks to this policy, the yuan's appreciation for all 2013 may be more or less over." The yuan has gained 1.81 percent far this year, bucking the weakening trend of other 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 6.1696 6.1729 +0.05 Spot yuan 6.1193 6.1201 +0.01
Divergence from midpoint* -0.82 (pct)
Spot change ytd +1.81 Spot change since 2005 revaluation +35.25
*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 the 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 6.1139 +0.09* Offshore non-deliverable 6.2296 -0.96**
*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 July show reduction in yuan appreciation expectations. GRAPHIC: http://link.reuters.com/tyx74t - Hot money outflows reach record high in July 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)