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China's yuan edges firmer, traders suspect influx of IPO dollars

* Talk of dollar inflows from Chinese firms' U.S. IPOs

* Latest economic data no immediate impact

* But dollar demand high on company dividend distribution

* Balanced dollar supply/demand to keep yuan at 6.23-6.27

SHANGHAI, June 3 (Reuters) - China's yuan firmed marginally against the dollar on Tuesday despite the central bank setting a weaker mid-point, as major banks sold dollars as China's markets reopened after a holiday on Monday. Spot yuan was at 6.2462 per dollar at midday, up 0.02 percent from Friday's close, after the People's Bank of China (PBOC) set its official midpoint at 6.1710, the weakest since Sept. 6 and 0.02 percent weaker than on Friday. The yuan usually follows the central bank's guidance to rise or fall, but the dollar sales by major banks prompted suspicions that they were unloading the proceeds from recent initial public offerings by Chinese companies on U.S. markets, a dealer at a Chinese commercial bank in Shanghai said. Shares of Chinese e-commerce firm JD.com Inc soared 20 percent in their U.S. market debut on May 22 as investors sought a piece of the China's booming online retail market, enabling the firm to raise $1.78 billion in its initial public offering. JD.com was the eighth Chinese company to go public in the United States this year. In total they have raised $2.99 billion, way more than in 2013, when there were eight IPOs for the whole year, and they raised $884 million. Investors were watching JD.com's performance to guage how Wall Street might receive an IPO by its much larger peer, Alibaba <IPO-ALIB.N>. Demand for dollars will be boosted by travellers going abroad for the summer holidays and dividend payments to overseas investors by Chinese state-owned enterprises this month. Traders thus expect a rough balance of dollar supply and demand in June, forecasting that the yuan will move in a narrow range of 6.23 to 6.27 in the month. The latest economic data had no immediate impact on the market, traders said. China's factory sector turned in its best performance in four months in May as export orders improved although activity still contracted, a private survey showed on Tuesday, adding to signs the economy may be stabilizing. The final reading of the HSBC/Markit purchasing managers' index (PM) for May rose to 49.4, lower than a preliminary reading of 49.7, but up from 48.1 in April. The PBOC has guided the yuan to fall 3.1 percent against the dollar so far this year to deter speculators from betting on a non-stop yuan rise. Before this year's unexpected depreciation, the yuan had steadily appreciated by more than 30 percent since its landmark revaluation in 2005. The central bank has never said it was deliberately pushing the yuan down, but currency dealers told Reuters they suspected the drop was driven primarily by China's "Big Four" state-owned banks, who bought dollars in the domestic foreign exchange market at the PBOC's behest.

The onshore spot yuan market at a glance:

Item Current Previous Change (pct) PBOC midpoint 6.1710 6.1695 -0.02 Spot yuan 6.2462 6.2473 0.02

Divergence from midpoint* 1.22 (pct)

Spot change ytd -3.08 Spot change since 2005 32.50

revaluation

*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.

The offshore yuan market at a glance:

Instrument Current Difference

from onshore (pct)

Offshore spot yuan 6.2483 -0.03 Offshore non-deliverable 6.2560 -1.36

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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KEY DATA POINTS - Yuan spot performance versus midpoint after trading band widened http://link.reuters.com/jyz38v - China's yuan, other emerging mkt currencies vs dollar http://link.reuters.com/xyd46v - Global currency performance INTERACTIVE GRAPHIC: http://link.reuters.com/cyx46v - China's trade surpluses mainly driven by weak imports rather than strong exports. GRAPHIC: http://link.reuters.com/qav68s - 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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(Editing by Simon Cameron-Moore)