China's yuan weakens, further gains seen as limited
HONG KONG, Sept 17 (Reuters) - China's yuan fell against the dollar on Tuesday on suspected intervention by the central bank to prevent its currency from appreciating too fast, a sign that any further gains by the yuan might be modest. Spot yuan traded at 6.1213 per dollar near midday, down 0.02 percent from the previous close. The People's Bank of China (PBOC) fixed the yuan's midpoint at 6.1571, or 0.03 percent weaker than Monday's 6.1554. In the past week, the PBOC set a series of stronger midpoints. But it restrained gains in the spot market in order to narrow the gap between the two rates and prepare for more liberalisation, traders said. "It is obvious the central bank does not want the yuan to rise too much since once there is demand to sell dollars, it enters the market to buy them," said a trader in Shanghai. "The spot will go nowhere in the short term given such interventions and trading interest is also undermined," he said. However, there's still optimism about the Chinese currency as the world's second-largest economy seems to have avoided a sharp slowdown and regained traction with a series of encouraging economic indicators. China drew $79.77 billion in foreign direct investment in the first eight months of 2013, up 6.37 percent from a year earlier, the Commerce Ministry said on Tuesday. Ministry spokesman Shen Danyang said he was confident the country could meet its target of 8 percent growth in overall trade this year.
The onshore spot yuan market at a glance:
Item Current Previous Change (pct) PBOC midpoint 6.1571 6.1554 -0.03% Spot yuan 6.1213 6.1203 -0.02% Divergence from -0.58%
Spot change ytd 1.78% Spot change since 2005 revaluation 35.21%
*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
Offshore spot yuan 6.1123 0.15% Offshore non-deliverable 6.2097 -0.85%
*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 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)