China's yuan hits two-week high on stronger midpoint, factory survey
HONG KONG, Sept 23 (Reuters) - China's yuan hit a two-week high against the dollar on Monday after the central bank set a record-high midpoint to reflect the weakness in the dollar, and on further signs that the world's second-largest economy is regaining traction. The People's Bank of China (PBOC) fixed the yuan's midpoint at 6.1475, or 82 pips lower than Friday's 6.1557, boosting expectations that the yuan will pick up its appreciation pace and gain for the third straight month. The yuan has risen 1.8 percent so far this year, mainly in April and May, while most other emerging market currencies suffered losses. "The midpoint fixing today caught the market off guard and we guess the central bank may let the yuan appreciate again," said a trader at a Chinese bank in Shanghai. Spot yuan opened at a two-week high of 6.1160 and eased to 6.1190 near midday, up 0.04 percent from the previous close of 6.1212. A series of strong economic reports from China in the past few months have added to market players' confidence in the yuan, which led to capital inflows to China in August, reversing capital outflows in the previous two months. Growth in China's factory sector accelerated to a six-month high in September, a preliminary survey showed on Monday, as stronger domestic and foreign demand added to recent signs of a turnaround in the economy. The flash HSBC Purchasing Managers' Index (PMI) climbed to 51.2 this month from August's 50.1. A breakdown of the data showed ten of 11 sub-indices rose in September. Traders said the central bank has recently been making efforts to narrow the gap between the midpoint fixing and the spot rate by setting higher midpoints but avoiding quick appreciation in the spot market. "We see Chinese banks buying dollars in the market which stops the yuan from rising too fast," said the trader above who expected the yuan to stay between 6.1150-6.1250 before a week-long holiday which starts on Oct. 1.
The onshore spot yuan market at a glance:
Item Current Previous Change (pct) PBOC midpoint 6.1475 6.1557 0.13% Spot yuan 6.119 6.1212 0.04% Divergence from -0.46%
Spot change ytd 1.82% Spot change since 2005 revaluation 35.26%
*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 6.1111 0.13% Offshore non-deliverable 6.1877 -0.65%
*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 Kim Coghill)