HONG KONG: China's yuan was broadly unchanged on Tuesday in subdued trading, as firmer oil prices offset optimism from a survey showing stronger Chinese manufacturing activity.
The yuan was changing hands at 6.2275 per dollar in mid-morning trade, slightly weaker than Monday's close of 6.2266 per dollar. It hit a one-month low of 6.2639 per dollar on May 28, according to Thomson Reuters data.
The People's Bank of China fixed the daily trading midpoint at 6.1545 per dollar, in line with market estimates and slightly stronger than Monday's fixing of 6.1557.
"Oil is trending higher and investors are waiting for more data to take a view on the currency," said a trader at a European Bank in Hong Kong.
Activity in China's factory sector expanded in June for the first time in six months as new orders surged, a preliminary HSBC survey showed on Monday, offering new signs the economy is stabilising thanks to Beijing's measures to shore up growth.
A gauge of broader market volatility has plummeted in recent weeks to levels not seen since well before the 2008 global financial crisis forcing currency traders to stay on the sidelines.
While falling volatility is a fertile ground for carry trades in the foreign exchange markets -- borrowing in a lower-yielding currency to invest in a higher-yielding one such as the Chinese renminbi -- the People's Bank of China has cracked down on such speculative flows this year.
Over the past few months, Beijing has widened the currency's trading band, switched around the daily midpoint fixings erratically and intervened heavily in the market in at least two different episodes to stamp out such trades.
The PBOC's crackdown has borne fruit with capital flows declining rapidly. Latest data shows that commercial and central bank purchases of foreign exchange has declined rapidly in recent months compared with last year indicating waning inflows.
Oil prices rallied nearly five percent amid the crisis in Iraq this month, touching nine-month highs above $115 a barrel last week, but have since eased slightly.
Investor sentiment on most emerging Asian currencies improved over the last two weeks, with the first bullish bets seen on China's yuan in four months, the latest Reuters FX poll showed.
Comments
Comments are closed for this article.