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China's yuan weakens despite state banks' US dollar sales
[SHANGHAI] China's yuan weakened against the US dollar on Thursday, despite major state-owned banks offering US dollar liquidity to meet corporate demand for the greenback, traders said.
The People's Bank of China set the midpoint rate at 6.9051 yuan per US dollar prior to market open, with the yuan marginally firmer than the previous fix 6.9066.
The spot market opened at 6.9029 per US dollar and was changing hands at 6.9055 at midday, 43 pips weaker than the previous late session close and 0.01 per cent softer than the midpoint.
"The market was stable, staying in a tight trading range," said a dealer at a foreign bank in Shanghai, adding that state-owned banks sold some dollars in morning trade to meet corporate demand.
Some market players said the steady US dollar sales by major state banks had helped prevent the yuan spot rate from sinking. State-owned banks have sold US dollars in the forex market regularly since late last year in what traders believe is part of official efforts to prevent the Chinese yuan from falling too fast.
Beijing is scheduled to hold the Belt and Road Forum this weekend, and dealers expect the foreign exchange market to remain stable in the coming days, as the authorities usually want to avoid any volatility ahead of major political and economic events.
The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 94.13, flat with the previous day's 94.13.
The global US dollar index fell to 99.608 from the previous close of 99.669.
The offshore yuan was trading 0.06 per cent weaker than the onshore spot at 6.9097 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 7.1085, 2.86 per cent weaker than the midpoint.
One-year NDFs are settled against the midpoint, not the spot rate.