China's yuan closed lower on Friday to end a week characterised by low volatility and moderate transaction volumes following Beijing's decision to widen the trading band on the currency from Monday. The yuan shed 0.07 percent on the day to close at 6.3085 per dollar. It is down 0.08 percent this week. The currency rose to as high as 6.3042 during the session, the same as the central bank's midpoint.
At one point the currency traded at 6.3192, signifying a intra-day trading range of 150 pips, an increase from tight ranges on Wednesday and Thursday. The PBOC last Saturday announced a widening of the yuan's trading band from 0.5 percent on either side of the midpoint to 1 percent.
Excluding a mild spike in volatility on Monday, however, the market has continued to hold back from testing the width of the new band and the currency has remained range-bound since, trading between 6.29 and 6.32 per dollar. Friday's session continued a trend that began in mid-March of the yuan trading lower than the midpoint.
Traders say this pattern is the result of midpoint fixings slightly stronger than the level the market feels comfortable with, as opposed to fundamental depreciation pressure. One year non-deliverable yuan forwards (NDFs) remain weaker than the spot yuan, trading at 6.3405 in late afternoon, but market players say NDFs are no longer reliable indicators of market expectations for the yuan's future value.
Comments
Comments are closed for this article.