SHANGHAI, May 20: China’s yuan edged higher on Monday after the central bank surprised the market and fixed the official midpoint almost unchanged despite a rally in the dollar.
Spot yuan was trading at 6.1399 against the dollar from 6.1419 at Friday’s close after the People’s Bank of China set the yuan’s midpoint at 6.1998, almost flat from 6.1997 on Friday.
‘Such a strong midpoint really surprised the market given the dollar’s strength in global markets,’ said a trader at a Chinese commercial bank in Shanghai.
‘It delivered a clear signal that the central bank would guide the yuan to appreciate further in the near term, although the market is not certain how much more the yuan could rise.’
The dollar index gained 0.8 percent on Friday to hit 84.317, its highest level since July 2010. The yuan can rise or fall 1 percent in a day from the PBOC’s midpoint.
Driven by strong capital inflows into China, the PBOC has guided the yuan to a slew of record highs since early April, but the rally paused last week after the dollar broke through a key resistance.
Barring a reverse in capital inflows, several traders said they now forecast the yuan to appreciate to 6.0 against the dollar in coming months compared with 6.2 which they had predicted in early April.
(agencies)
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