HONG KONG: China's yuan firmed against the US dollar on Thursday even as the People's Bank of China set a weaker midpoint for the 10th consecutive day.
Traders said large Chinese banks had offered dollars in the market in an apparent effort to ensure the yuan does not depreciate too quickly.
The People's Bank of China set the midpoint rate at 6.8692 per dollar prior to market open, weaker than the previous fix 6.8592.
The spot market opened at 6.8760 per dollar and was changing hands at 6.8692 at midday, -69 pips firmer than the previous late session close and flat against the midpoint.
The spot rate is currently allowed to trade with a range 2 percent above or below the official fixing on any given day.
"Chinese banks are offering dollars at 6.87 level in the morning," said a trader at a Chinese bank in Shanghai.
"We are not sure whether 6.87 is the bottom in the near term or that the central bank just does not want the yuan to fall too much within the day," the trader said.
Both HSBC and Standard Chartered lowered their forecasts for the yuan on Wednesday. HSBC expected the yuan to fall to 6.9 per dollar by the end of 2016 and 7.2 by end-2017, from previous forecasts of 6.8 and 6.9, respectively.
The dollar index is still hovering around a near 14-year high against a basket of currencies due to expectations of higher US interest rates later this year.
The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 95.06, firmer than the previous day's 95.04.
The global dollar index fell to 100.35 from the previous close of 100.41.
The offshore yuan was trading -0.24 percent weaker than the onshore spot at 6.8855 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 7.0635, -2.75 percent away from the midpoint.
One-year NDFs are settled against the midpoint, not the spot rate.
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