SHANGHAI, Sept 6: China’s yuan was little changed on Friday and appeared headed for a nearly flat week, as the central bank has signalled its intention to hold the yuan steady amid declines in other emerging market currencies.
Spot yuan changed hands at 6.1203 per dollar near midday, 0.01 percent weaker than Thursday’s close, after the central bank set its daily midpoint at 6.1728 per dollar, 0.05 percent weaker than Thursday’s fix.
The yuan has traded in a narrow range this week, after closing last week at 6.1195.
As other emerging market currencies such as the Indian rupee and Malaysian ringgit have fallen sharply in recent weeks, fuelled by expectations of QE tapering by the Federal Reserve, the People’s Bank of China (PBOC) has held its fixing nearly flat, signalling it wants to prevent the yuan from following suit.
The yuan’s steady performance has occurred despite signs of capital outflow from China. Chinese banks, including the central bank, were net sellers of foreign exchange in both June and July, following six straight months of net purchases.
Hot money outflow totalled $43.2 billion in July, according to a Reuters estimate based on official data, the largest monthly outflow since Reuters’ historical series begins in January 2008. [GRAPHIC:http://link.Reuters.Com/saz74t ]
That the yuan actually strengthened slightly in July and August, despite these outflows, suggests that the PBOC may have tapped its forex reserves to intervene in the market and prevent a fall in the yuan.
Still, traders increasingly believe that the yuan, which has gained 1.8 percent so far in 2013, will not rise much further this year. Most of the gains occurred in April and May. The yuan is now 0.2 percent weaker than the all-time high of 6.1090 touched on Aug. 16.
(agencies)
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