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China's yuan steady, central bank strengthens defence ahead of Q2 GDP
[SHANGHAI] The yuan was little changed against the dollar on Thursday, as China's central bank was suspected of intervening in the market to smoothen strong dollar demand ahead of GDP data this week.
The government is due to release economic growth data for the second quarter on Friday, which could add pressure on the yuan, after June trade figures on Wednesday missed expectations.
The People's Bank of China set the midpoint rate at 6.6846 per dollar prior to market open, 0.07 per cent firmer than the previous fix 6.6891.
The spot yuan opened at 6.6890 per dollar and was changing hands at 6.6880 at midday, flat from the previous close.
Traders reported state-owned banks were offering large dollar liquidity at 6.6880 per dollar on behalf of the central bank to offset heavy dollar demand from clients.
"The central bank has stepped up its defence recently, given that client dollar demand has risen," said a trader at a Chinese commercial bank in Shanghai.
"More and more people are talking about yuan depreciation these days and the central bank decided it's time for some deterrence." The Chinese currency hovered not far from its 5-1/2-year low hit on Wednesday last week and has fallen almost 3 per cent against the dollar so far this year.
China's economic growth likely cooled to a fresh seven-year low of 6.6 per cent in the second quarter as the industrial sector loses steam and a boost from financial services fades, according to a Reuters poll of 61 economists.
"Given that the economic fundamentals haven't changed much, I doubt the data would have much of an impact on the forex market," said a trader at another Chinese commercial bank in Shanghai.
China's exports fell more than expected in June as global demand remained stubbornly weak and as Britain's decision to leave the European Union clouds the outlook for one of Beijing's biggest markets.
Traders said the worse-than-expected trade data had no impact on the yuan.
The offshore yuan was trading 0.09 per cent softer than the onshore spot at 6.6938 per dollar.