- In the spot market, onshore yuan opened at 6.4380 per dollar and was changing hands at 6.4330 at midday, 15 pips firmer than the previous late session close.
SHANGHAI: China's yuan inched higher against the dollar on Monday, even against a weaker fixing, after a senior central bank official over the weekend reiterated no change to the currency policy.
Deputy governor of the central bank, Liu Guoqiang, said on Sunday that fluctuations in either direction will become the norm for China's currency, with the yuan exchange rate continuing to depend on market supply and demand, as well as changes in global financial markets.
"China's central bank crashed the speculation about possible currency regime change," said Tommy Xie, head of Greater China research at OCBC Bank in Singapore.
"The People's Bank of China (PBOC) reiterated that its managed floating exchange rate system based on market demand and supply with reference to a basket of currencies will remain suitable for the foreseeable future."
Currency traders said Liu's remarks clarified earlier comments from central bank researchers that had unnerved the market, especially exporters. One research felt China should free up the exchange rate over time to support wider global adoption of the currency, while the other said the exchange rate target could be dropped to allow further strengthening to offset rising commodity prices.
Prior to market opening, the PBOC set the midpoint rate at 6.4408 per dollar, 108 pips or 0.17% weaker than the previous fix of 6.43.
In the spot market, onshore yuan opened at 6.4380 per dollar and was changing hands at 6.4330 at midday, 15 pips firmer than the previous late session close.
Some traders said that after the central bank's comments on the weekend, the yuan hugged a tight range of about 70 pips on Monday morning, tracking the dollar's movements.
A foreign bank trader said that as higher dollar demand is expected due to upcoming corporate dividend payments, many of the bank's clients are adopting a wait-and-see approach and holding off on converting their dollar receipts to yuan.
Overseas-listed Chinese companies usually have to make their interim dividend payments between May and August, and such seasonal FX purchases could pile downward pressure on the yuan. Standard Chartered had expected total dividend payments would reach $84 billion this year.
In global markets, the dollar hovered near a three-month low, as investors wound back bets on earlier US rate hikes.
By midday, the global dollar index fell to 90.021 from the previous close of 90.033, while the offshore yuan was trading at 6.432 per dollar.