Yuan opens up, trades flat as holiday approaches
SHANGHAI, Sept 30 (Reuters) - The Chinese yuan rose slightly on Monday morning after the central bank lifted the official guidance rate, but trading was narrow and volumes moderate as traders prepared for markets to close on Tuesday for a week. Traders continued to predict that the spot yuan would remain near 6.12 per dollar, a range it has hugged tightly since mid-August. The People's Bank of China (PBOC) set the official midpoint guidance rate up slightly on Monday morning at 6.1480 per dollar. Traders say that the bank is using a combination of high midpoint settings and behind the scenes intervention to bring the spot price and the fixing closer into line. Economists, traders and investors have been closely monitoring news coming from the opening of China's new free trade zone in Shanghai, which regulators have touted as a test bed for experimenting with deep changes to the country's currency regime. "The FTZ is Shanghai's biggest opportunity since the opening of the Pudong 1/8district in Shanghai 3/8," said Stephen Zhu, director of Ashland Partners International Ltd. "Seizing this opportunity is vital for Shanghai if it aims to become an influential city not only in China, but also in Asia." Shanghai officials on Sunday said they planned to allow domestic and foreign banks to conduct cross-border financing business from the zone, and also allow individual investors in the zone to freely buy equities in China or overseas without going through one of the existing qualified investor programmes, which operate under a quota system. Markets will reopen for business on Tuesday Oct. 10.
The onshore spot yuan market at a glance:
Item Current Previous Change PBOC midpoint 6.148 6.1495 +0.02% Spot yuan 6.119 6.1202 +0.02% Divergence from -0.47%
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 onshore Offshore spot yuan 6.1185 0.00%* Offshore non-deliverable 6.1995 -0.83%**
*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 - Shanghai FTZ no threat to HK just yet - CHINA MONEY - PBOC preparing market for more yuan volatility - 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
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
(Additional reporting by Shen Yiming in SHANGHAI and Coco Li in BEIJING; Editing by Eric Meijer)