HONG KONG: China's yuan was little changed against the dollar on Tuesday, as the central bank appears to prefer keeping it stable by intervening in the market via state-owned banks.
The "redback" has outperformed most other Asian currencies and has gained 2.2 percent so far this year amid a volatile global economic environment, raising concerns that a stronger yuan will hurt China's exporters.
China's Commerce Ministry said on Tuesday that a fast pace of yuan appreciation had squeezed exporters' profits and it was difficult for the world's second-largest economy to achieve its 8 percent trade growth target this year.
Spot yuan traded at 6.0915 near midday, virtually unchanged from the previous close. It traded within a very tight range between 6.0920 and 6.0915 in the morning.
The People's Bank of China (PBOC) fixed the yuan's midpoint at 6.1317, some 0.02 percent stronger than the previous day's 6.1332 to reflect a decline in the global dollar index.
"The central bank has been buying dollars in the past few days once the dollar falls, which makes it difficult for us to trade," said a trader at a Chinese bank in Shanghai.
In the offshore market, the Chinese currency rose to a record high of 6.0672, leaving the spread between spot onshore and offshore yuan at 230 pips, its widest since Jan. 22.
Much of that gap has been driven by a rally in offshore yuan, while the onshore currency has stayed relatively subdued in a tiny range thanks to the relentless intervention by state-run banks.
Market watchers say wide-ranging reforms promised by Beijing in the Communist Party's third plenum has helped lift global investors' confidence in the Chinese economy as well as its currency.
Comments
Comments are closed for this article.