SHANGHAI, July 21 (Reuters) – The yuan inched higher on
Wednesday as the greenback paused after its recent rallies and
as Chinese companies ramped up dollar selling.
Prior to the market opening, the People’s Bank of China
(PBOC) set the midpoint rate at 6.4835 per dollar, 20
pips firmer than the previous fix of 6.4855.
In the spot market, onshore yuan opened at 6.4800
per dollar and was changing hands at 6.4758 at midday, 86 pips
firmer than the previous late session close.
Several market participants said gains in the yuan starting
on Tuesday were supported by heavy dollar selling from
corporates and major state-owned banks, prompting some to
speculate if authorities were trying to slow the pace of recent
yuan weakness and prevent it from breaking through the
psychologically important 6.5 per dollar level.
China’s major state-run banks often act as agents for the
central bank in the country’s FX market, but they also trade on
their own behalf.
Meanwhile, the rebound in the yuan has pushed the its value
against its rivals to a more than 5-year high. Yuan’s basket
index, as measured by the China Foreign Exchange Trade System
(CFETS) index, rose to 98.55 on Wednesday, up nearly
4% so far this year, according to Reuters’ calculations based on
official data.
While many analysts and traders worry that too high an index
could weigh on China’s export competitiveness, Li Liuyang, chief
FX analyst China Merchants Bank, said the effect should be the
“This round of risk aversion sentiment was driven by worries
over the pandemic outbreak, and China does a relatively better
job controlling the epidemic. Therefore, in the mid- and long-
term, it should have a positive impact on China’s exports,” he
said, adding the yuan may weaken less against the dollar while
continue to rise versus its peers.
The global dollar index stood at 93.029 by midday,
when the offshore yuan was trading at 6.4782 per
The yuan market at 0405 GMT:

Item Current Previous Change
PBOC midpoint 6.4835 6.4855 0.03%

Spot yuan 6.4758 6.4844 0.13%

Divergence from -0.12%
Spot change YTD 0.81%
Spot change since 2005 27.81%

Key indexes:

Item Current Previous Change

Thomson 98.63 98.44 0.2
CNH index
Dollar index 93.029 92.965 0.1

*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

Instrument Current Difference
from onshore
Offshore spot yuan 6.4782 -0.04%
Offshore 6.6498 -2.50%

*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 Kim
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