HONG KONG: China's yuan fell against the dollar on Tuesday after the central bank set the midpoint near its weakest level in eight months as dollar demand from oil companies emerged at month-end.
Traders said China's sluggish economic outlook and the uncertainty of interventions from the central bank remain the drag for market players to build up long yuan positions.
Spot yuan changed hands at 6.2409 per dollar near midday, down 0.03 percent from Monday's close at 6.2392. The People's Bank of China (PBOC) fixed the midpoint at 6.1687, up 0.02 percent from the previous day's 6.1699.
"We saw some big Chinese banks buying dollars in morning trade, maybe for their clients, as demand from oil companies to buy dollars is usually strong at the end of a month," said a trader at a Chinese bank in Shanghai.
"Demand and supply of dollars has been generally balanced in recent trading days and the market is playing a key role deciding which direction the yuan will move toward," the trader said, opposed to being nudged along by the authorities.
After engineering a sharp fall in the yuan earlier this year to shake out speculative money, China's central bank has stayed on the sidelines for some time and traders expect the currency to trade narrowly in the short term.
The Chinese currency has lost 3 percent against the dollar so far this year, wiping out all its gains in 2013 and becoming one of the worst performers among its emerging market peers.
Though the bias of most macro hedge funds is to look for opportunities to position for yuan appreciation, they are not heavily involved in the market at present, analysts say.
China's annual economic growth slowed to an 18-month low of 7.4 percent in the first quarter, raising the risk that the world's second-largest economy could miss its growth target of 7.5 percent this year, for the first time in 15 years.
Bearish sentiment on the yuan has risen slightly on concerns that economic growth may be cooling more rapidly than earlier expected, a Reuters poll showed on Thursday. Investors have been taking bearish bets against the currency since mid-March, according to Reuters' bi-weekly survey.
In the offshore non-deliverable market where speculators bet on future yuan moves, one-year contracts traded at 6.2525 on Tuesday, implying the Chinese currency may depreciate 1.4 percent in a year's time.
Comments
Comments are closed for this article.