China's c.bank keeps spot yuan flat, midpoint near record high
* PBOC sets strong fix but seen curbing gains in market
* Seen preventing yuan from firming far beyond 6.12/dlr
* PBOC's will to keep yuan stable may be tested end-Sept
SHANGHAI, Sept 11 (Reuters) - China's yuan was little changed against the dollar on Wednesday as dealers attributed the spot market's stability to possible intervention by the central bank. The People's Bank of China (PBOC) set a firmer midpoint before the market open, pegging it only three pips away from its record high, but traders suspected the PBOC had also intervened through major banks to restrain 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. Economists say that if Beijing can get the midpoint and the spot rate in closer alignment, it can then widen the intra-day trading band that currently holds the traded exchange rate within 1 percent of the midpoint in either direction. Spot yuan changed hands at 6.1197 per dollar at midday, almost unchanged from Tuesday's close of 6.1200. Before trading began, the PBOC set its midpoint at 6.1601, or 0.02 percent stronger than Tuesday's 6.1612 and within arm's reach of the base rate's record high of 6.1598 fixed on June 17. But in trading, the central bank apparently acted quickly to curb expectations of yuan appreciation, traders said. "The PBOC has sent a clear signal that it wants to keep the yuan stable for now, having confined the currency's movements mainly around 6.12 over the past two or three weeks," said a dealer at a Chinese commercial bank in Shanghai. "But yuan trading volume will typically pick up near the end of a quarter, so late September will be the time to gauge how determined the PBOC is to maintain the yuan's stability." Traders said they believed the Chinese authorities may also want to take a wait-and-see attitude towards the yuan's value for now given a wider 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 6.1601 6.1612 +0.02 Spot yuan 6.1197 6.1200 0.00
Divergence from midpoint* -0.66 (pct)
Spot change ytd +1.81 Spot change since 2005 revaluation +35.24
*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 6.1125 +0.12* Offshore non-deliverable 6.2260 -1.06**
*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)