China's yuan flat, c.bank sets guidance at 2-week low

SHANGHAI, Feb 13 (Reuters) - China's yuan was largely flat against the U.S. dollar on Tuesday, as support from a marginal loss in the greenback was eclipsed by weaker central bank guidance via its midpoint. The dollar slipped on Tuesday as global equity markets continued to stabilize after their recent rout, reviving risk appetite and putting the U.S. currency on the defensive on worries about its receding yield advantage. The People's Bank of China (PBOC) lowered its official midpoint to 6.3247 per dollar on Tuesday, the weakest in more than two weeks, after a decline in the spot yuan a day earlier. Tuesday's midpoint was 246 pips, or 0.39 percent, weaker than Monday's fix of 6.3001 and was the softest since Jan. 31. In the spot market, the onshore yuan opened at 6.3258 per dollar and was changing hands at 6.3275 at midday, only 7 pips softer than the previous late session close and 0.04 percent weaker than the midpoint. Yuan trade was tepid with daily trading volume standing at $5.177 billion at midday, with many market participants already on holiday. The half-day volume on normal trading days is usually around $15 billion. The Chinese currency continued tracking the dollar's movements, traders said. However, some market participants were unwinding long yuan proprietary trade positions ahead of the Lunar New Year holiday, in addition to banks' clients buying dollars - both combining to add downward pressure on the yuan. China's financial markets will be closed during the week-long Lunar New Year holiday, which starts on Feb. 15. Markets reopen on Feb. 22. Households usually purchase dollars ahead of the new year for their trips abroad. Earlier on Tuesday, the PBOC said it injected 393 billion yuan ($62.14 billion) into the financial system via one-year medium-term lending facility (MLF) loans, with interest rates unchanged. The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 97.38, weaker than the previous day's 97.53. The global dollar index fell to 90.126 from the previous close of 90.208. The offshore yuan was trading 0.02 percent weaker than the onshore spot at 6.329 per dollar. Offshore one-year non-deliverable forwards contracts (NDFs), considered the best available proxy for forward-looking market expectations of the yuan's value, traded at 6.4627, 2.14 percent weaker than the midpoint. One-year NDFs are settled against the midpoint, not the spot rate.

The yuan market at 0358 GMT:


Item Current Previous Change PBOC midpoint 6.3247 6.3001 -0.39% Spot yuan 6.3275 6.3268 -0.01% Divergence from 0.04%


Spot change YTD 2.84% Spot change since 2005 30.80%


Key indexes:

Item Current Previous Change Thomson 97.38 97.53 -0.2

Reuters/HKEX CNH index

Dollar index 90.126 90.208 -0.1

*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 2 percent from official midpoint rate it sets each morning.


Instrument Current Difference

from onshore

Offshore spot yuan 6.329 -0.02% * Offshore 6.4627 -2.14%

non-deliverable forwards


*Premium for offshore spot over onshore

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

($1 = 6.3245 Chinese yuan)

(Reporting by Winni Zhou and John Ruwitch; Editing by Jacqueline Wong)