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China's yuan little changed on c.bank guidance, narrow trade range seen

Sunday, 10 Nov 2013 | 11:19 PM ET

* PBOC sets lower midpoint, state banks buy dollars

* Capital continues flowing into China as exports recover

* Yuan seen moving just above 6.1/dlr in coming weeks

SHANGHAI, Nov 11 (Reuters) - China's yuan barely moved against the dollar on Monday after the central bank set a slightly weaker official midpoint and state-owned banks continued buying dollars to curb appreciation pressure, traders said. Spot yuan traded at 6.0906 per dollar near midday, compared with Friday's close of 6.0905, after the People's Bank of China (PBOC) fixed Monday's midpoint at 6.1390, or 0.06 percent weaker than the previous one of 6.1355. "Corporate sales continue keeping dollar supply abundant, while state banks absorb most excessive dollar supply, which many believe is being done on behalf of the central bank," said a trader at a Chinese commercial bank in Shanghai. "That means the yuan is still under pressure to appreciate, while the PBOC is trying to keep the pace of yuan rises under control," the trader added. On Friday, the government posted better-than-expected October exports and trade surplus, helping explain the source of what traders have said was an overabundance of dollars in the domestic market. China's exports rebounded by 5.6 percent in October from a year earlier, beating market expectations for a 3.2 percent rise and adding to a run of indicators suggesting the economy has found its footing. Imports rose 7.6 percent against a poll forecast for an 8.5 percent rise, leaving the trade surplus at $31.1 billion compared with forecasts of $23.9 billion.

The onshore spot yuan market at a glance:

Item Current Previous Change PBOC midpoint 6.1390 6.1355 -0.06% Spot yuan 6.0906 6.0905 0.00% Divergence from midpoint* -0.79% Spot change ytd 2.29% Spot change since 2005 revaluation 35.89%

*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 onshore Offshore spot yuan 6.0784 +0.20%* Offshore non-deliverable 6.1590 -0.32%**

forwards

*Premium for offshore spot over onshore

**Figure reflects difference from PBOC's official midpoint, since non-deliverable forwards are settled against the midpoint. .

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RECENT DEVELOPMENTS - CHINA MONEY - PBOC hopes to drain sloppy money without raising primary rates as growth revives - ANALYSIS-Rally in tightly managed yuan shows China leery of FX reform - CHINA MONEY - PBOC preparing market for more yuan volatility - ANALYSIS-Bullish yuan herd leaves China fundamentals in the dust. - CHINA MONEY - Currency war or no, Beijing doesn't want Asia to take stable.

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

(Reporting by Lu Jianxin and Pete Sweeney; Editing by Richard Borsuk)