SHANGHAI: China's yuan eased against the dollar on Monday after the central bank set the daily guidance rate lower for a second straight session, but a near record trade surplus helped to reverse the loss, traders said.
The People's Bank of China (PBOC) set the midpoint rate at 6.1205 per dollar prior to market open, 0.04 percent weaker than the previous fix at 6.1181.
The spot market opened at 6.2055 per dollar and touched the intraday low at 6.2083 during early morning trading session.
But the loss narrowed after China posted May trade data. The yuan was changing hands at 6.2044 at midday, only down 0.02 percent from the previous close.
China's exports in May fell 2.5 percent from a year earlier and imports slid 17.6 percent, data released by the General Administration of Customs on Monday.
That left the country with a near record trade surplus of $59.49 billion for the month, putting some upward pressure on the yuan.
However, analysts say they do not expect any sharp movement of the yuan in either direction in the short term, as the focus of authorities is on stability.
"The effort to include the yuan in International Monetary Fund's Special Drawing Right (SDR) leaves little chance for the currency to move sharply this year," said Liu Yaxin, a macro-strategist at China Merchants Securities in Shenzhen.
She forecast the yuan to move in a range of 6.18-6.20 per dollar in the near future.
The offshore yuan was trading 0.07 percent weaker than the onshore spot at 6.2086 per dollar.
Offshore one-year non-deliverable forwards contracts (NDFs), considered the best available proxy for forward-looking market expectations of the yuan's value, traded at 6.2425, or 1.95 percent weaker than the midpoint.
One-year NDFs are settled against the midpoint, not the spot rate, and corporates are wary of using NDFs to hedge given the basis risk inherent in them.
As a result, the NDF market has lost liquidity in recent years and has frequently proven an unreliable measure of sentiment
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