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China's yuan eases amid strong US dollar demand
[SHANGHAI] China's yuan weakened slightly against the US dollar on Monday as strong demand for the greenback offset a stronger midpoint fixing by the central bank.
The People's Bank of China set the midpoint rate at 6.8673 per US dollar prior to the market open, 150 pips or 0.2 per cent firmer than the previous fix, which was 6.8823.
The stronger fixing came after a slide in the US dollar in global markets, with the euro surging to a five-month high at one point after the market's favoured candidate won through the first round of the French election, reducing the risk of a Brexit-like shock.
In the spot market, the yuan opened at 6.8800 per US dollar and was changing hands at 6.8875 at midday, seven pips weaker than the previous late session close and 0.29 per cent weaker than the midpoint.
"Today's midpoint was set at a reasonable level compared with our model. But the yuan spot rate was dragged down due to increasing dollar purchase by banks," said a trader at a Chinese bank in Shanghai.
Spot yuan was little changed against the dollar last week, but the latest China Foreign Exchange Trade System (CFETS) data showed that the index for the yuan's value based on the market's trade-weighted basket fell around 0.2 per cent in the same period to 92.98.
The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 93.9, weaker than the previous day's 94.05.
The offshore yuan was trading 0.02 per cent firmer than the onshore spot at 6.886 per US 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 7.0605, 2.74 per cent weaker than the midpoint.
One-year NDFs are settled against the midpoint, not the spot rate.