Yuan flat vs dollar, cbank sets weaker mid-point
SHANGHAI: China's yuan was mostly flat against the dollar on Wednesday after the Peoples' Bank of China set a weaker mid-point to reflect a strong dollar index.
Dealers said banks and their clients built long positions in dollars to bet on a continued near-term rise in the dollar in global markets, but investors remained cautious after the central bank set only a slightly weaker mid-point.
The 24-pip fall in the PBOC's mid-point, widely lagged a 0.5 percent jump in the dollar index overnight, which reflects the central bank's wish to keep the yuan in a tight range. Spot yuan was trading at 6.6650 versus the dollar by midday, little changed from Tuesday's close of 6.6670 but was still up 2.43 percent since the PBOC announced a depegging in mid-June.
It moved in a small range of 6.6647 to 6.6774, trading firmer than the central bank's daily mid-point of 6.6786, the weakest level since Nov. 3, and down from Tuesday's 6.6762.
"We are focused on the dollar index performance for now," said a dealer at an European bank in Shanghai. "And the stable fixing gives us a signal that the central bank has no intention to let the yuan move too much." Dealers said that in the long term, the yuan's appreciation was an inevitable trend as China needs to fight against imported inflation. -PB News