HONG KONG: China’s yuan inched up on Thursday against the dollar in a tight range, buoyed by the central bank’s continual support through a stronger-than-expected daily fixing and by a survey showing services activity quickened slightly in July.
The Caixin/S&P Global services purchasing managers’ index (PMI) rose to 54.1 in July from 53.9 in June, marking an expansion of business activity across the services sector for a seventh straight month.
The 50-point mark separates expansion from contraction in activity.
The latest data from the private-sector business survey contrasted with the official survey on Monday which showed services activity has continued to slown.
Khoon Goh, head of Asia research at ANZ, said: “the jury is still out on whether more specific measures would be implemented to boost household spending.”
For the past month the central bank has sough to dampen volatility in the exchange rate by setting stronger than expected daily fixings.
On Thursday, the People’s Bank of China set the midpoint rate at 7.1495 per US dollar prior to the market open, weaker than the previous fix 7.1368 but over 400 pips stronger than consensus estimate.
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Spot yuan opened at 7.1888 per dollar and was changing hands at 7.1916 at midday, 4 pips stronger than the previous late session close and 0.59% weaker than the midpoint. The spot rate is currently allowed to trade within a range 2% above or below the official fixing on any given day.
The dollar index rose to 102.666 from the previous close of 102.59. Overnight, the US Treasury announced that it would sell $103 billion of longer term securities, an amount that exceeded dealers’ expectation.
The yield on the benchmark 10-year US Treasury note, which moves inversely to prices, gained and at one point reached its highest point since November.
If the 10-year yield breaks above 4.1% it would trigger further sell-offs in risky assets, bolster the dollar and put pressure on the yuan, said ANZ Goh.
The offshore yuan was trading 0.13% weaker than the onshore spot rate of 7.201 per dollar.
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