SHANGHAI: China's yuan rose modestly against the dollar for the second day on Friday, buoyed by a marginally stronger central bank midpoint and improved sentiment after the currency's recent rebound, traders said.
Spot yuan stood at 6.2286 per dollar at midday, up 0.02 percent from Thursday's close, after the central bank fixed its midpoint at 6.1524, up 0.01 percent from Thursday.
The yuan has rebounded 0.5 percent since the end of April after slumping 3.3 percent in the first four months of this year as the People's Bank of China (PBOC) engineered a depreciation of the currency to deter speculators betting on non-stop yuan appreciation.
More recently, however, the PBOC has fixed its midpoint generally stronger to signal that it may feel the depreciation earlier in the year was enough to deter punters, traders said.
China's healthy export growth in May, which resulted in the country's biggest trade surplus in five years, also offered the central bank an easy excuse to let the yuan's depreciation take a pause, traders said.
A Reuters poll of 11 currency analysts showed sentiment on the yuan turned bullish for the first time in four months, fueled by a change of the PBOC's tactics.
Still, traders said the PBOC's recent midpoints have not sent signs that it is guiding yuan to resume appreciation.
For instance, the central bank set three sharply lower midpoints in the first three days of this week as it moved to dampen speculation that it would allow the yuan to resume appreciation after the currency staged its biggest weekly rise of 0.6 percent since late 2011 last week.
Because of these weaker midpoints, if the yuan closes at its midday level on Friday, it will lose 0.3 percent in the week in an apparent PBOC cooling warning to new yuan bulls, traders said.
Plus there is now a rough balance of dollar supply and demand in the domestic currency market, traders said the yuan would have limited potential to rise sharply in coming weeks.
The yuan's medium-term trend will more or less determined by the performance of China's exports and how much trade surpluses it will record in June and in the third quarter, traders said.
"There has been no clear trend for the yuan's movements of late despite its recent rebound," said a trader at a Chinese commercial bank in Shanghai.
"The market is awaiting fresh signals from the PBOC's midpoint and coming trade data to gauge the yuan's next possible direction."
China will post June trade data around July 10.
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