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China's yuan nearly flat on stable fixing, stability seen through end-2013

midday, compared with Wednesday's close of 6.0714. The
Thursday, 26 Dec 2013 | 12:01 AM ET

* Yuan little changed at 6.0718/dlr at midday

* Yuan mostly flat since record high 6.0703 on Dec. 10

* Yuan seen steady near 6.07/dollar through year-end

* Moderate appreciation to resume in 2014 - traders

SHANGHAI, Dec 26 (Reuters) - China's yuan barely budged against the dollar in thin trade on Thursday, after the central bank again signalled its intention to keep the Chinese currency stable for the last week of 2013. Spot yuan has moved in a very narrow range since touching a record high of 6.0703 per dollar on Dec. 10, except for briefly touching 6.0702 on Dec. 23. Most market players believe that the People's Bank of China has been setting unofficial yearly targets for the yuan since the currency's landmark revaluation in 2005, aimed at balancing international pressure for yuan appreciation and the needs of domestic exporters. Traders reckon the central bank has already achieved its target for 2013. "Banks and other investors appear to focus only on urgent demand at the end of the year," said a dealer at a European bank in Shanghai. "They also have no intention to quote far away from central bank rates at this time of a year." Spot yuan changed hands at 6.0718 yuan per dollar central bank set Thursday's midpoint at 6.1156, little changed from Wednesday's fix of 6.1160. Traders said the yuan is likely to hold near 6.07 through the year-end. In 2014, China's resilient trade surplus and hot money inflows will continue to support yuan appreciation. But market watchers also expect the central bank to continuing using its daily midpoint to moderate the pace of yuan gains.

The onshore spot yuan market at a glance:

Item Current Previous Change (pct) PBOC midpoint 6.1156 6.1160 0.01 Spot yuan 6.0718 6.0714 -0.01

Divergence from midpoint* -0.72 (pct)

Spot change ytd 2.61 Spot change since 2005 revaluation 36.31

*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

(pct)

Offshore spot yuan 6.0724 -0.01* Offshore non-deliverable 6.1370 -0.35**

forwards

*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 - Hot money distorts China's exports as speculators seek to cash in on yuan, rate reforms - China central bank suggests faster tempo for freeing yuan

- China investors face bumpy ride as reform speculation intensifies - CHINA MONEY - PBOC preparing market for more yuan volatility

KEY DATA POINTS - Hot money returned to China in Sept, Oct after two months of outflows GRAPHIC: http://link.reuters.com/saz74t - China's trade surpluses mainly driven by weak imports rather than strong exports. GRAPHIC: http://link.reuters.com/qav68s - Corporate FX behavior reflects yuan appreciation expectations. GRAPHIC: http://link.reuters.com/tyx74t - Despite relatively stable dollar/yuan exchange rate, the yuan is appreciating on a trade-weighted basis. GRAPHIC: http://link.reuters.com/sed74t

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(Reporting by Lu Jianxin and Gabriel Wildau; Editing by Michael Urquhart)