SHANGHAI: Spot yuan fell slightly against dollar on Thursday after the People's Bank of China set a slightly weaker midpoint and on strong month-end dollar demand from companies, dealers said.
Demand for dollars often rises near the end of the month, as import contracts frequently have month-end settlement dates.
"Oil companies and other big companies need a lot of dollars to do business," said a dealer at a Chinese commercial bank in Shenzhen.
Traders told Reuters that in addition to structural demand for dollars, recent low oil prices had increased appetites for the currency. Benchmark oil prices have been steadily falling since May and are now hovering near an eight-month low.
The central bank set the yuan's midpoint at 6.3190 on Wednesday, 17 points weaker than Wednesday's fix but 364 points stronger than the closing spot price. It had set a stronger midpoint over the past three sessions.
Spot yuan fell slightly to 6.3618 at midday, down from 6.3554 on Wednesday's close.
Some dealers said the yuan could rise over the next few sessions amid speculation some big banks are selling dollars in the market on the central bank's request. Many traders think the central bank sets undisclosed dollar/yuan levels which it targets at month- or quarter-end.
Offshore, one-year non-deliverable forwards (NDFs) were bid at 6.4150 and offshore deliverables of the same tenor traded at 6.4435 at close. Onshore yuan forwards also suggested depreciation, bidding at 6.4046.
Offshore spot yuan continued to trade near the onshore spot at 6.3615 per dollar at close.
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