SHANGHAI, May 14 (Reuters) - China's yuan inched higher
against the dollar on Friday, following a firmer official
guidance rate, but the local unit looked set for the first
weekly loss in six.
The Chinese yuan took a breather after a volatile week, by
strengthening to a near three-year high before giving back most
of the gains, with traders attributing the sharp fluctuations
mostly to the dollar's movements in global markets following
surprising U.S. data.
The dollar stabilised against a basket of currencies on
Friday as investors tried to assess the risk of U.S. inflation
rising faster than expected and prodding the Federal Reserve to
hike interest rates sooner.
The spot yuan calmed as well. The onshore market
opened at 6.4485 per dollar and was changing hands at 6.4450 at
midday, 94 pips firmer than the previous late session close.
If the yuan finishes the late night session at the midday
level, it would have lost 0.22% to the dollar for the week,
snapping five straight weeks of gains.
The spot yuan traded just above the key 6.45 per dollar
level and swung in an extremely tight range of about 50 pips in
morning trade, with several traders expecting the yuan to remain
tracking the broad dollar movements in the near term.
Prior to market opening, the People's Bank of China (PBOC)
set the midpoint rate at 6.4525 per dollar, 87 pips
or 0.13% firmer than the previous fix of 6.4612.
Many traders and analysts said their projections for the
midpoint showed larger errors this week, suggesting official
attempts to stabilise the market.
"The PBOC has been setting USD/CNY fixing
higher-than-expected for five consecutive sessions but in a
decreasing degree, aimed at smoothing movements in the yuan
exchange rate when U.S. employment and inflation data sparked
market volatility," Gao Qi, FX strategist at Scotiabank in
Singapore, said in a note.
Some traders also pointed out that seasonal corporate demand
for the greenback could bring some volatility to the yuan.
Overseas-listed Chinese companies usually have to make their
interim dividend payments between May and August, and such
seasonal FX purchases could pile downward pressure on the yuan.
Standard Chartered had expected total dividend payments would
reach $84 billion this year.
Separately, markets would switch attention to a medium-term
loan operation next week to gauge PBOC's policy stance. A batch
of 100 billion yuan worth of medium-term lending facility (MLF)
is set to expire on Monday, with markets expecting the PBOC to
roll it over.
Investors expect the cost of MLF loans is unlikely to
change, but the volume could offer some monetary policy outlook
after the PBOC kept injecting a minimal daily 10 billion yuan
through reverse repos in open market operations for 53 straight
trading days, as of Friday.
The global dollar index fell to 90.718 by midday from
the previous close of 90.757, while the offshore yuan
was trading at 6.446 per dollar.
The yuan market at 0400 GMT:
ONSHORE SPOT:
Item Current Previous Change
PBOC midpoint 6.4525 6.4612 0.13%
Spot yuan 6.445 6.4544 0.15%
Divergence from -0.12%
midpoint*
Spot change YTD 1.29%
Spot change since 2005 28.42%
revaluation
Key indexes:
Item Current Previous Change
Thomson 97.46 97.36 0.1
Reuters/HKEX
CNH index
Dollar index 90.718 90.757 0.0
*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% from official midpoint rate it sets each
morning.
OFFSHORE CNH MARKET
Instrument Current Difference
from onshore
Offshore spot yuan 6.446 -0.02%
*
Offshore 6.6083 -2.36%
non-deliverable
forwards
**
*Premium for offshore spot over onshore
**Figure reflects difference from PBOC's official midpoint,
since non-deliverable forwards are settled against the midpoint.
.
(Reporting by Winni Zhou and Andrew Galbraith; Editing by
Stephen Coates)
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