SHANGHAI, Apr 18: China’s central bank guided the yuan lower against the dollar on Thursday after setting record-high midpoints in the previous four sessions, amid market speculation it may widen the band within which the currency is traded.
The People’s Bank of China (PBOC) fixed its official midpoint at 6.2416 versus the dollar on Thursday from an all-time high of 6.2342 on Wednesday.
Spot yuan was trading at 6.1803 at midday, down from 6.1723 at the close on Wednesday, its highest level since China established the domestic foreign exchange market in 1994.
To the great surprise of the market, the PBOC let the yuan appreciate 236 pips over the four previous trading days, setting new highs on the way, compared with only 154 pips for all 2012.
The yuan is allowed to rise or fall by 1 percent in either direction from the base rate, but in recent weeks Chinese regulators have made statements in the English-language media suggesting the trading band might be widened.
China is committed to widening the intraday trading band of the yuan, Wang Yu, a deputy director-general of the research bureau of the central bank, was quoted as saying in the official English-language China Daily this month.
But some dealers said the statements were more posturing toward critics of China’s currency policy than signals to the domestic market that the PBOC is genuinely planning to change the band.
‘I think it’s no more than rhetoric,’ said a dealer at a Chinese commercial bank in Shanghai.
‘Today’s midpoint did not reflect the idea that a widening is coming, nor we have heard anything that a change is coming. It’s a way that China handles political pressure for yuan to appreciate, this time before the G20 meeting in Washington.’
Other traders pointed out that it would be meaningless to widen the band while the PBOC is still using the midpoint to leash the exchange rate.
(AGENCIES)
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