Yuan hovers near record high; PBOC paces appreciation
SHANGHAI: China's yuan steadied versus the dollar on Tuesday, hovering near its record trading high, after the People's Bank of China set the mid-point at a new peak but up only slightly from Monday's fixing, traders said.
The PBOC recently fixed a slew of record high mid-points, a signal it may let the Chinese currency's fortunes decouple from political events.
But the record high daily fixings this week have only been marginally higher than each previous session, an indication that the government will continue controlling the pace of yuan rises and preventing its appreciation from inviting speculative "hot money" inflows, traders said.
"As the PBOC keeps the mid-point lingering near 6.588 and gives no sign of an immediate breakthrough, market players are cautious not to push the yuan too far away from that level," said a dealer at a European bank in Shanghai.
Spot yuan closed at 6.5827 against the dollar compared with 6.5813 at Monday's close. It has now risen 3.70 percent to the dollar since its mid-June depegging.
It touched an intraday low of 6.5853 and a high of 6.5815, just shy of 6.5808 hit on Monday -- its highest intraday trading level since China let the yuan be publicly trade in 1994.
Traders said they expected the yuan to continue trading narrowly in the near term, awaiting fresh PBOC signals.
Offshore, benchmark one-year dollar/yuan non-deliverable forwards were bid at 6.4550 late on Tuesday, down from 6.4590 at Monday's close. Their implied yuan appreciation in a year's time rose to 2.07 percent from 2.00 percent.
Dollar/yuan offshore forwards have generally staged a lacklustre performance in recent weeks, partly because signs of a U.S.! economi c recovery pushed hedged funds to reallocate their assets, traders said.
Before trading started on Tuesday, the PBOC fixed the yuan's daily mid-point versus the dollar at 6.5881, slightly firmer than Monday's 6.5883. The currency can rise or fall 0.5 percent from the PBOC's fixing in a given day.
China has so far played a game of hide-and-seek with its critics who say the government has kept the yuan artificially low to protect its exports, thus robbing jobs in other countries.
It typically lets the yuan rise ahead of major political events to deflect pressure but will pull it back to some extent afterwards. Accumulatively, the yuan has risen nearly 26 percent since and including its landmark revaluation in July 2005.
The PBOC has used its mid-point to signal policy intention and its aim to balance external pressures for a stronger yuan against domestic pressures to keep the currency stable.
The PBOC recently fixed a slew of record high mid-points, a signal it may let the Chinese currency's fortunes decouple from political events.
But the record high daily fixings this week have only been marginally higher than each previous session, an indication that the government will continue controlling the pace of yuan rises and preventing its appreciation from inviting speculative "hot money" inflows, traders said.
"As the PBOC keeps the mid-point lingering near 6.588 and gives no sign of an immediate breakthrough, market players are cautious not to push the yuan too far away from that level," said a dealer at a European bank in Shanghai.
Spot yuan closed at 6.5827 against the dollar compared with 6.5813 at Monday's close. It has now risen 3.70 percent to the dollar since its mid-June depegging.
It touched an intraday low of 6.5853 and a high of 6.5815, just shy of 6.5808 hit on Monday -- its highest intraday trading level since China let the yuan be publicly trade in 1994.
Traders said they expected the yuan to continue trading narrowly in the near term, awaiting fresh PBOC signals.
Offshore, benchmark one-year dollar/yuan non-deliverable forwards were bid at 6.4550 late on Tuesday, down from 6.4590 at Monday's close. Their implied yuan appreciation in a year's time rose to 2.07 percent from 2.00 percent.
Dollar/yuan offshore forwards have generally staged a lacklustre performance in recent weeks, partly because signs of a U.S.! economi c recovery pushed hedged funds to reallocate their assets, traders said.
Before trading started on Tuesday, the PBOC fixed the yuan's daily mid-point versus the dollar at 6.5881, slightly firmer than Monday's 6.5883. The currency can rise or fall 0.5 percent from the PBOC's fixing in a given day.
China has so far played a game of hide-and-seek with its critics who say the government has kept the yuan artificially low to protect its exports, thus robbing jobs in other countries.
It typically lets the yuan rise ahead of major political events to deflect pressure but will pull it back to some extent afterwards. Accumulatively, the yuan has risen nearly 26 percent since and including its landmark revaluation in July 2005.
The PBOC has used its mid-point to signal policy intention and its aim to balance external pressures for a stronger yuan against domestic pressures to keep the currency stable.
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