Economy & Finance

China’s yuan eases vs dollar on weaker central bank midpoint

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China’s yuan slipped against the dollar on Monday after the central bank fixed a weaker guidance rate, traders said.

The People’s Bank of China set the midpoint rate CNY=SAEC at 6.3676 per dollar prior to the market open, 0.11 percent weaker than the previous fix of 6.3607.

In the spot market, yuan CNY=CFXS opened at 6.3670 per dollar and was changing hands at 6.3690 at midday, 0.07 percent weaker than the previous close.

China’s central bank has ordered banks to tighten supervision of their clients’ foreign exchange deals to prevent cross-border arbitrage, and raised trading fees charged to some banks to settle their clients’ forex deals, sources told Reuters on Friday.

Later on Friday, Jin Zhongxia, executive director for China on the IMF’s policymaking board, said China was hoping for a positive outcome on whether the yuan could be included in the Special Drawing Rights (SDR) basket.

Beijing has launched a major diplomatic push for the yuan’s inclusion in the IMF basket as part of its long-term strategic goal of reducing dependence on the dollar and France said on Friday it would back the bid.

The offshore yuan was trading 0.48 percent weaker than the onshore spot at 6.3999 per dollar.

Offshore one-year non-deliverable forwards contracts CNY1YNDFOR=, considered the best available proxy for forward-looking market expectations of the yuan’s value, traded at 6.5775, or 3.19 percent weaker than Monday’s midpoint.

The yuan market at a glance:

ONSHORE:

Item Current Previous Change

PBOC midpoint 6.3676 6.3607 -0.11%

CNY=SAEC

Spot yuan 6.369 6.3643 -0.07%

CNY=CFXS

Divergence from 0.02%

midpoint*

Spot change ytd -2.59%

Spot change since 2005 29.95%

revaluation

*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 2 percent from official midpoint rate it sets each morning.

OFFSHORE CNH MARKET

Instrument Current Difference

from onshore

Offshore spot yuan 6.3999 -0.48%

CNH= *

Offshore 6.5775 -3.19%

non-deliverable

forwards

CNY1YNDFOR= **

*Premium for offshore spot over onshore CNY=CFXS

**Figure reflects difference from PBOC’s official midpoint, since non-deliverable forwards are settled against the midpoint. CNY=SAEC.

GRAPHICS:

The yuan in trade-weighted terms link.reuters.com/sed74t

The spot market versus the trading band reut.rs/1MhsqOi

(Reporting by the Shanghai Newsroom- Editing by Kim Coghill)

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