China's yuan flat as c.bank keeps firm hand on market

Monday, 11 Nov 2013 | 11:39 PM ET

* Yuan trades narrowly in line with trend this month

* C.bank uses midpoint to signal stable yuan intention

* Dollar supply keeps yuan under appreciation pressure

* Market awaits PBOC guidance for new round of yuan rise

SHANGHAI, Nov 12 (Reuters) - China's yuan remained little changed against the dollar on Tuesday after moving in a narrow range, continuing a trend of stability this month guided by the central bank. Spot yuan traded at 6.0915 per dollar near midday, compared with Monday's close of 6.0913. The People's Bank of China (PBOC) fixed Tuesday's midpoint at 6.1360, or 0.05 percent stronger than the previous at 6.1390. "The PBOC's official midpoint has barely changed over the past two weeks, signalling an intention to keep the currency stable for now," said a trader at a Chinese commercial bank in Shanghai. "The central bank's attitude has offset the fact that there is still a big dollar supply in the market." The government posted better-than-expected October exports and trade surplus last Friday, helping explain the source of what traders have said was an overabundance of dollars.

As robust dollar supply keeps the yuan under appreciation pressure, the market is awaiting the PBOC's guidance for another round of yuan rises, which traders said they expected in the second half of December. The central bank has controlled the pace of yuan rises since the currency's landmark revaluation in 2005, letting it mainly appreciate during major political events, such as Chinese leaders' visits to the United States or participation in global events, while maintaining stability at other times.

The onshore spot yuan market at a glance:

Item Current Previous Change PBOC midpoint 6.1360 6.1390 +0.05% Spot yuan 6.0915 6.0913 0.00% Divergence from midpoint* -0.73% Spot change ytd 2.28% Spot change since 2005 revaluation 35.87%

*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.


The offshore yuan market at a glance:

Instrument Current Difference from onshore Offshore spot yuan 6.0781 +0.22%* Offshore non-deliverable 6.1570 -0.34%**


*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 - 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 Jacqueline Wong)