The yuan jumped 0.3 percent on Thursday, its biggest one-day rise this year, with dealers citing massive dollar selling by major Chinese banks, suggesting they might have been directed by the People's Bank of China to guide the yuan higher. Dealers said state banks flooded the market with dollars in the final minutes of trading, but it was unclear if the heavy yuan buying was due to client demand.
Spot yuan ended at 6.2997 against the dollar, up from Wednesday's close of 6.3229. In the past, the People's Bank of China (PBOC) has used the "big four" state banks to channel dollars or yuan into the market to influence the exchange rate. "The amount is so huge - it doesn't look like client demand," said a dealer at a Chinese bank in Shanghai. "Like previous exercises, the state big four will get some direction from the central bank."
Earlier in the day, the central bank set the yuan fixing at 6.3004, from Wednesday's 6.3092, despite a 0.1 percent rise in the dollar index on Wednesday. The PBOC typically strengthens its midpoint in response to a weaker greenback overnight but has broken this pattern in the last two days.
Earlier on Thursday, dealers said the central bank signalled its intention to guide the yuan higher by setting a higher midpoint close to the key psychological level of 6.30. The central bank apparently wanted to temper expectations of yuan depreciation. Such expectations have grown in overseas markets in recent weeks. Offshore one-year non-deliverable forwards implied depreciation of 0.48, compared with a 0.25 percent appreciation implied on February 22.
Comments
Comments are closed for this article.