SHANGHAI, May 10: China’s yuan edged lower on Friday, drifting from its all-time high hit in the previous session, after the central bank set its official midpoint weaker to reflect a rally in the dollar index overnight, traders said.
Spot yuan was trading at 6.1405 against the dollar at midday, slipping from 6.1309 at the close on Thursday. The PBOC fixed its midpoint at 6.2016 before trade began, weaker than Thursday’s all-time high midpoint of 6.1925.
Guided by a series of record high midpoints, the yuan changed hands at as high as 6.1307 per dollar in intraday trading on Thursday, its highest level since China established the domestic foreign exchange market in 1994.
The central bank’s tolerance of a relatively sharp appreciation of the yuan since early April has puzzled some market observers, as China needs to support its exports with a stable currency amid weak global economic conditions.
The PBOC has not explained its reasons, although regulators have publicly said that conditions are now beneficial to ‘consider’ a free exchange rate for the yuan.
‘Everybody prefers to sell dollars whenever they get hold of them,’ said a trader at a European bank in Shanghai.
‘All-time high midpoints and trading peaks have created a circle of competitive yuan appreciation, making sentiment to the Chinese currency very bullish. The yuan’s uptrend appears remaining intact despite Thursday’s correction.’
Highlighting the bullish sentiment, a Reuters poll released on Thursday showed that foreign exchange analysts believe long yuan positions in the market are at their largest in 21 months.
(agencies)
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