SHANGHAI: China's yuan closed at its highest level in three weeks on Monday after the central bank set its daily midpoint at a record high, but traders said dollar demand is strong and expect little further appreciation in the near term.
The People's Bank of China (PBOC) fixed its midpoint at 6.1598 per dollar on Monday, below the 6.16 psychological barrier and 0.01 percent stronger than Friday's previous record high.
Spot yuan ended at 6.1250 percent on Monday, its the highest closing level in three weeks and 0.09 percent stronger than Friday's close.
The dollar/yuan rate was 0.6 percent below the midpoint, compared with a gap of more than 0.9 percent that persisted on most days between the fourth quarter of 2012 and last week, signalling that appreciation pressure has diminished.
"Big banks started to buy dollars today," said a dealer at a Chinese bank in Shanghai.
"The impact of the midpoint is weakening for now, with the demand for dollars being the key reason."
Indeed, figures from the State Administration of Foreign Exchange (SAFE) on Monday showed that firms bought $17.2 billion more worth of yuan from banks than they bought in foreign exchange in May. That marked a sharp decrease from $34.2 billion in surplus yuan purchases in April.
Comments
Comments are closed for this article.