China's yuan stays in narrow range, shepherded by c.bank
HONG KONG, Sept 27 (Reuters) - China's yuan was little changed against the dollar on Friday, after the central bank set a slightly weaker midpoint to reflect an overnight rise of the dollar, and dealers said trading was stuck in a very tight range. The yuan is likely to end September virtually flat, after showing gains in the the previous two months. Spot yuan traded at 6.1209 near midday, 0.01 percent higher than Thursday's close of 6.1214. The People's Bank of China (PBOC) set its official midpoint at 6.1495, down 0.03 percent from Thursday's 6.1477. "The spot has been hovering around 6.12 for some time, and it seems to be at a level that the central bank would like it to stay," said a trader at a Chinese bank in Shanghai. "We've got used to that. If the yuan falls to 6.1220, we will buy some; and if it rises to 6.1190, we do the opposite," the trader said. The PBOC set a series of higher midpoint fixings in the past month but likely intervened in the spot market to hold back yuan strength, a move that is seen as a prelude to further market reforms. Analysts expect the central bank to widen daily yuan trading band quite soon with some betting on November as a possible timing. Spot yuan trading against the dollar is capped at +/- 1 percent at present. Beijing has accelerated reforms of financial markets, and on Thursday it unveiled new steps to free up interest rates, saying it would allow banks to price loans based on market-based benchmark rates and to launch certificates of deposit soon.
The market is also waiting for details of Shanghai free trade zone where foreign exchange and interest rates are expected to be liberalised. The official launch is on Sept 29.
The onshore spot yuan market at a glance:
Item Current Previous Change PBOC midpoint 6.1495 6.1477 -0.03% Spot yuan 6.1209 6.1214 0.01% Divergence from midpoint* -0.46% 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 onshore Offshore spot yuan 6.1195 0.03% Offshore non-deliverable 6.1996 -0.81%
*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 Simon Cameron-Moore)