HONG KONG, Aug 28: China’s yuan rose marginally against the dollar on Wednesday after the central bank set a higher official midpoint fixing amid signs of a brighter Chinese economic outlook.
Expectations of a stronger yuan have increased recently, with the market waiting to see the Chinese currency break a record high of 6.1090 against the U.S. Dollar in the coming weeks.
Spot yuan changed hands at 6.1213 per dollar near midday, up 0.01 percent from the previous close of 6.1217, after the People’s Bank of China (PBOC) set its midpoint at 6.1667, or 0.03 percent stronger than Tuesday.
After the yuan hit an all-time high of 6.1090 earlier this month, ‘investors tend to believe the central bank is willing to let the yuan appreciate gradually,’ said a trader at an Asian bank in Shanghai.
The dollar index, which tracks the currency against a basket of six major currencies, fell overnight as investors became jittery that Western governments would take military action against Syria and turned to safe-haven yen and Swiss franc.
One-year onshore yuan swap points were 830 points on Wednesday, far below its level of 1,680 points on June 20. The sharp fall is a signal that onshore yuan liquidity is relatively ample and demand for forward yuan is heavy.
Improvement in China’s fundamentals has boosted market players’ confidence in the yuan. Industrial profits in July grew 11.6 percent from a year earlier, picking up from annual growth of 6.3 percent in June.
China’s factory activity in August may have expanded at the fastest pace in three months, a Reuters poll showed, adding to evidence that the world’s second-largest economy may be stabilising after slowing for more than two years.
*Divergence of the dollar/yuan exchange rate. Negative number indicates that spot yuan is trading stronger than the midpoint. The People’s Bank of China (PBOC) allows the exchange rate to rise or fall 1 percent from official midpoint rate it sets each morning.
(AGENCIES)
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