SHANGHAI, July 16: The yuan edged higher against the dollar on Tuesday, despite a weaker official fixing, and dealers said the market was looking for firmer signals from the central bank on which way it wanted the currency to move.
The People’s Bank of China (PBOC) has let the yuan rise and fall moderately since early June after it allowed an explosive rally in the currency in April and May, but the market has flattened out since as signs emerge that the rally has begun
to negatively impact exports.
‘The PBOC’s decision to suddenly stop letting the yuan appreciate appears to have left a vacuum in terms of market direction,’ said a trader at a European bank in Shanghai. ‘People are now awaiting fresh signals of where the exchange rate may go.’
Spot yuan was trading at 6.1365 versus the dollar at midday, rising 0.02 percent from Monday’s close, despite the PBOC setting its daily midpoint at 6.1692, 0.05 percent weaker than Monday’s fix.
Traders said market supply and demand for dollars was roughly balanced for now, and the yuan is likely to move narrowly around the current level in the near term, barring major market-moving events.
The onshore spot yuan market at a glance:
Item Current Previous Change
PBOC midpoint 6.1692 6.1663 -0.05%
Spot yuan 6.1365 6.1378 +0.02%
Divergence from -0.53%
Midpoint*
Spot change ytd +1.53%
Spot change since 2005 revaluation +34.87%
*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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