China's yuan firms after central bank sets higher midpoint rate

[SHANGHAI] China's yuan firmed against the dollar on Tuesday after the central bank set the daily guidance rate higher.

The People's Bank of China (PBOC) set the midpoint rate at 6.1136 per dollar prior to the market opening, 0.05 per cent firmer than the previous fix at 6.1168.

The spot market opened at 6.2084 yuan per dollar and was at 6.2067 at midday, up 0.03 per cent from the previous close.

Traders said the strong midpoint fixing could indicate the monetary authorities did not want to see the yuan falling beyond the 6.21 per dollar level.

The central bank has been using its daily fixing and market intervention to maintain stability in the yuan since mid-March as the government has pledged to maintain a steady exchange rate to cushion a slowdown in the world's second-largest economy.

China Merchants Bank said in a research note on Monday the currency was likely to remain steady until the International Monetary Fund announces a decision on China's joining the Special Drawing Rights (SDR) arrangement, expected later this year.

The offshore yuan was trading 0.02 per cent weaker than the onshore spot rate at 6.2078 per dollar.

REUTERS