SHANGHAI: China’s yuan firmed slightly against the dollar on Tuesday, after the People’s Bank of China (PBOC) emphasised its determination to keep the currency stable in a quarterly policy implementation report released a day earlier.
Addressing the exchange rate, the report said PBOC would “resolutely correct pro-cyclical market activities, deal with behaviors that disrupt market orders, prevent overshooting risks in the currency and avoid the formation of one-sided and self-reinforced market expectations.”
The report reinforced the message that PBOC would keep the yuan exchange rate basically stable at reasonable and balanced levels.
Prior to market opening, the PBOC set the midpoint rate , around which the yuan is allowed to trade in a 2% band, at a near six-month high of 7.1132 per dollar, 27 pips firmer than the previous fix of 7.1159.
Tuesday’s official guidance rate, the strongest since June 9, continued to be set firmer than expected, a situation that has persisted for months with market watchers interpreting it as an official attempt to support the yuan.
Tuesday’s midpoint was 300 pips firmer than Reuters estimate of 7.1432.
“We see further short-term downward pressure on USD/CNY, as the central bank continues to press daily fixings,” analysts at Barclays said in a note.
“If the USD selling tide reverses and data disappoint, CNH funded carry trades may look attractive again, with positioning lightening up significantly.”
The spot yuan opened at 7.1530 per dollar and was changing hands at 7.1508 at midday, 20 pips firmer than the previous late session close.
Some currency traders said the yuan was likely to swing around the psychologically important 7.15 per dollar before the release of the closely watched purchasing managers index for November later this week.
The survey is considered a leading indicator of the health of the economy. The mixed data for October pointed to an uneven and bumpy recovery path.
By midday, the global dollar index fell to 103.154 from the previous close of 103.199, while the offshore yuan was trading at 7.1562 per dollar.
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