Yuan edges up on firmer fixing and steady dollar

SHANGHAI: China's yuan inched up against the US dollar in thin trade on Tuesday, supported by a stronger fixing and a steady dollar.

The dollar index, which tracks the US currency against a basket of six major rivals, traded within recent ranges, as optimism that US tax cuts would pass was countered by concerns about what its ultimate effect on growth would be.

Prior to market opening on Tuesday, the People's Bank of China set the midpoint rate at 6.6098 per dollar, 64 pips or 0.1 percent firmer than the previous fix 6.6162.

In the spot market, the onshore yuan opened at 6.6162 per dollar and was changing hands at 6.6156 at midday, 14 pips firmer than the previous late session close but 0.09 percent weaker than the midpoint.

Traders said the yuan was trading narrowly, with some institutions taking advantage of the tight price ranges to make multiple intraday trades for quick profits. They added that overall trade was light.

"Market participants have not figured out a clear direction in the yuan, and companies also adopted a wait-and-see approach now," said a Shanghai-based trader at a foreign bank.

He noted that usual year-end dollar demand from households and companies was muted this year due to anticipation of a likely stronger yuan in 2018.

The trader and others said they expected the yuan to hover between 6.58 and 6.63 per dollar for the rest of the year.

Separately, official data showed on Monday that China's commercial banks sold a net $7.5 billion of foreign exchange in November, compared with a net purchase of $2.8 billion in October, while foreign exchange regulator said supply and demand in the market continued to be balanced last month.

The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 95.28, weaker than the previous day's 95.32.

The global dollar index fell to 93.689 from the previous close of 93.695.

The offshore yuan was trading 0.04 percent weaker than the onshore spot at 6.613 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 6.765, 2.29 percent weaker than the midpoint.

One-year NDFs are settled against the midpoint, not the spot rate.