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China's yuan up slightly, anxiety before Brexit vote limits rise
[SHANGHAI] The yuan was up slightly against the US dollar on Wednesday, though a lower official mid-point and uncertainty ahead of Britain's referendum on whether to remain in the European Union capped gains.
Spot yuan opened at 6.5899 per US dollar and was changing hands at 6.5857 at midday, 0.07 per cent above the previous close, with traders saying the overnight close of 6.5900 had already factored some of the US dollar's global strength.
That allowed the yuan to shrug off the People's Bank of China setting the midpoint rate at 6.5935 per US dollar prior to market open, 0.42 per cent weaker than the previous fix at 6.5656.
Wednesday's midpoint was the second lowest fixing in over five years after last Wednesday's record of 6.6001.
Markets also took in stride Federal Reserve chair Janet Yellen's testimony before Congress where she expressed general optimism about the US economy and said gradual hikes in the federal funds rate were likely to be needed.
"Yellen's testimony is within market expectations. Right now, all the focus is on Britain's referendum," said a trader at a Chinese commercial bank in Shanghai.
"China's forex market has been relatively quiet of late. If Britain chooses to leave, that could give China's central bank a test on how equipped the market is now for uncertain events."
The US dollar index rose over 0.4 per cent on Tuesday, back above 94.00 before losing some steam in Wednesday's Asian trade, standing at 93.900 around midday.
On Tuesday, the PBOC said that China is considering allowing local commercial banks to participate in offshore yuan trade, as the country looks to project greater influence in the offshore currency market.
Traders said the move is in line with China's efforts to achieve yuan unification in both the onshore and offshore markets, but initial progress may be slow.
The offshore yuan was trading 0.15 per cent softer than the onshore spot at 6.5956 per US dollar.