China's yuan edges up as soft US data dampens the US dollar
[SHANGHAI] China's yuan was firmer against the US dollar at midday on Tuesday, after the central bank fixed a stronger midpoint in response to the greenback's slip as soft US data dampened expectations for an April Federal Reserve interest rate hike.
"This surely further eased the short-term depreciation pressure on the yuan," a trader at an Asian bank said.
"I have to say luck was on our side when the dollar was not faring well."
Prior to market opening, the People's Bank of China set the midpoint rate at 6.506 per US dollar, 0.26 per cent stronger than the previous fix of 6.5232.
In the spot market, the yuan opened at 6.5099 per US dollar and was changing hands at 6.5098 at midday, 0.02 per cent stronger than the previous close.
Traders reported an equilibrium in market supply and demand, in line with the two-way fluctuations in the currency supported by the authorities.
"If the market continues to engage in dollar-selling activities, there might be a further easing of capital outflows in March," said a trader at a Chinese commercial bank in Shanghai.
Traders reported increasing US dollar sales in the forex market in the past week, as the market moved to price in the prospect of a stable yuan, which may further ease the country's capital outflows.
Onshore one-year yuan/US dollar deliverable forwards were quoted at 6.5764 around midday, implying expectations of a slightly bigger depreciation over 12 months than seen in Monday's close of 6.5736.
The State Administration of Foreign Exchange said on Monday that it has not rolled out any regulatory measures limiting foreign exchange purchases but vowed to tackle any irregularities in the market.
The offshore yuan was trading 0.06 per cent softer than the onshore spot at 6.5138 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 6.6845, or 2.67 per cent weaker than the midpoint.
REUTERS
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