SHANGHAI: China's currency notched higher on Tuesday morning as traders reported aggressive yuan buying by a major state bank and weak corporate demand for dollars.
The yuan set its daily midpoint virtually flat at 6.3078 versus the dollar, little changed from Monday's fix of 6.3077. But spot yuan traded at 6.2486 near midday, a gain of 0.1 percent from Monday's close.
A trader at a city commercial bank in Shanghai said Bank of China , one of China's "big four" state-owned commercial banks, was selling dollars aggressively in morning trade, pushing the yuan higher.
Traders have frequently cited BOC in recent weeks as a major source of yuan demand. Such reports bolster the view of analysts who believe that the yuan's recent strength is due in part to intervention by the People's Bank of China (PBOC).
The PBOC's interventions in currency markets typically occur via trades with major state banks such as BOC. But such trades are usually not visible to the rest of the market, so traders can only guess whether the PBOC is behind the market moves.
The yuan demand from BOC came on top of weak demand for dollars from corporate clients over the last two days, traders said.
The yuan has rallied 2.4 percent since hitting a year low of 6.3967 on July 25. The rally has caused many Chinese importers and exporters to reduce long dollar positions built up earlier in the year, when the yuan was depreciating.
With the appreciation trend now in place for nearly three months, exporters are inclined to trade most of their dollar receipts for yuan, traders and analysts say.
The midpoint is the daily reference rate from which China's central bank allows the dollar/yuan rate to rise or fall by 1 percent in a single day.
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