China's yuan firms, but restrained by suspected intervention
* PBOC sets strong fix but seen curbing gains in market
* Seen preventing yuan from firming far beyond 6.12/dlr
* Asian currency depreciation may be main factor
* PBOC wants narrower gap between midpoint and spot rate
SHANGHAI, Sept 10 (Reuters) - China's yuan rose slightly against the dollar on Tuesday amid strong dollar sales, but dealers cited possible central bank intervention to temper the currency's gains. The People's Bank of China (PBOC) fixed a firmer midpoint which paved the way for a moderate rise, but it likely intervened through major banks to restrain further gains. The central bank appears to want to narrow the gap between its official midpoint and the spot exchange rate, which has mostly remained near its upper limit of 1 percent stronger than the midpoint since late last year, buoyed by a general oversupply of dollars in the domestic market, traders said. Spot yuan changed hands at 6.1194 per dollar at midday, up 0.03 percent from Monday's close of 6.1210. Before trading began, the PBOC set its midpoint at 6.1612, or 0.05 percent stronger than Monday's 6.1642. But in trading, the central bank apparently acted quickly to curb expectations of yuan appreciation, traders said. "Today's midpoint sparked some dollar sales early in the session that quoted the yuan relatively strong, but these sales were quickly overwhelmed by larger transactions quoting the yuan around 6.12," said a dealer at a Chinese commercial bank in Shanghai. "It's widely suspected in the market that the PBOC has used primary dealers to keep the yuan largely stable." The PBOC has recently signalled its intention to keep the spot yuan stable around 6.12 versus the dollar, traders said, adding that if the central bank continues setting its midpoint stronger while keeping its rate in trading relatively stable, the gap between the two rates will gradually narrow. They said China may want to take a wait-and-see attitude towards the yuan's value for now amid a general trend of depreciation of Asian currencies in recent months.
The onshore spot yuan market at a glance:
Item Current Previous Change (pct) PBOC midpoint 6.1612 6.1642 +0.05 Spot yuan 6.1194 6.121 +0.03
Divergence from midpoint* -0.68 (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
Offshore spot yuan 6.1095 +0.16* Offshore non-deliverable 6.2200 -0.95**
*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
(Reporting by Lu Jianxin and Pete Sweeney; Editing by Jacqueline Wong)