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China's yuan up on state bank support, central bank seen keeping firm hand
[SHANGHAI] The yuan edged up against the dollar on Friday, as state-owned banks were seen capping yuan weakness in the market amid a flurry of economic data this week.
China reported slightly better-than-expected second quarter economic growth but the figures had no major impact in the forex market as rates barely budged before and after the data.
"Right now, we mainly look to market dollar demand and state banks' attitude," said a trader from another Chinese commercial bank in Shanghai.
The People's Bank of China set the midpoint rate at 6.6805 per US dollar prior to market open, 0.06 per cent firmer than the previous fix of 6.6846.
The spot yuan opened at 6.6810 per US dollar and was changing hands at 6.6827 at midday, up 0.09 per cent from the previous close.
If the Chinese currency closes around the midday level, it would be flat for the week after having hovered not far from its 5-1/2-year low set last week.
Traders said state-owned banks were defending the yuan at 6.6850 per US dollar on behalf of the PBOC in the morning, but as the US dollar slipped against a basket of major currencies later on, the Chinese currency subsequently firmed.
"I expect the intervention might very well last until the end of July," said a trader at a Chinese commercial bank in Shanghai.
"The goal is to deter speculators who are betting on the yuan to fall further, to make them believe there's no basis for yuan depreciation."
The central bank largely eased off interventions in June even as the yuan repeatedly broke through 5-1/2-year lows, as seen in the country's unexpected FX reserve rise.
China's economy grew 6.7 per cent in the second quarter from a year earlier, data showed on Friday, steady from the first quarter and slightly better than expected as the government stepped up efforts to stabilise growth in the world's second-largest economy.
The offshore yuan was trading 0.11 per cent softer than the onshore spot at 6.6899 per US dollar.