HONG KONG: China's yuan edged up slightly on the dollar on Thursday, after the central bank guided the midpoint away from a seven-month low, with traders citing balanced dollar demand and supply.
Spot yuan changed hands at 6.2184 near midday, up 0.05 percent from Wednesday's close of 6.2214. The People's Bank of China (PBOC) set the yuan midpoint at 6.1575, up 0.02 percent from the previous day's 6.1589.
"The yuan has lost almost 400 pips against the dollar within a month and it's time for it to take a rest," said a trader at a Chinese bank in Shanghai.
"I think for the next three months, the yuan will remain stuck in a tight range between 6.18 and 6.23 per dollar, and I don't rule out the possibility it will depreciate for the whole year," the trader said.
The Chinese currency has depreciated 2.7 percent against the dollar so far this year, reversing its steady gains of the past few years, as Beijing acted to shake out speculative money that bet on non-stop, one-way appreciation.
The campaign led by the central bank since the start of the year has seen some success, traders said. Demand and supply of dollars has been relatively balanced over the past few days when daily movements of the yuan were within 100 pips most of the time.
In the non-deliverable forwards market, one-year contracts priced the yuan at 6.2505 per dollar, which implied the yuan would depreciate 1.5 percent in a year's time.
However, fund inflows to China continue. The country's foreign exchange reserves, the world's largest, rose to $3.95 trillion at the end of the first quarter from $3.82 trillion at the end of the previous quarter, higher than forecast in a Reuters poll of $3.922 trillion.
The "redback" has risen 33 percent since its landmark revaluation in 2005, underpinned by strong capital inflows into the country for the yuan and Chinese assets.
The US government has warned China that its currency is too weak and has expressed doubt over the Asian giant's resolve to let market forces guide the value of the yuan.
But Chinese Foreign Ministry spokeswoman Hua Chunying said on Wednesday that China would continue with the "reform of its renminbi exchange rate mechanism" and urged the United States to recognise its aims to "perfect and regulate" the exchange rate system.
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