China's yuan firmed against the dollar on Monday after the G7 agreed in principle that it would be good to include the currency in the International Monetary Fund's currency basket, traders said. The People's Bank of China (PBoC) set the midpoint rate at 6.1207 per dollar prior to market open, the lowest level since Apr.28, or 0.02 percent weaker than the previous fix of 6.1196. The spot market opened at 6.1976 per dollar and was changing hands at 6.1961 at midday, up 0.04 percent from the previous close.
Finance chiefs from the Group of Seven industrial nations agreed on Friday that it is desirable to include the renminbi in the International Monetary Fund's currency basket - the so-called Special Drawing Rights (SDRs). "It brigthtened the view that the yuan will join the SDRs in the middle of this year, therefore excluding the possibility of a fall in the short term," said a trader at a Chinese city commercial bank in Shanghai.
Traders expect the central bank will continue to keep the currency relatively stable despite the slowing economy, and partly in a bid to support the internationalisation of the yuan this year. Growth in China's giant factory sector edged up to a six-month high in May, an official survey showed on Monday, but economic conditions remain weak and traders said it did not have an immediate impact on the market. The offshore yuan was trading -0.06 percent away from the onshore spot at 6.1998 per dollar. Offshore one-year non-deliverable forwards contracts (NDFs), considered the best available proxy for forward-looking market expectations of the yuan's value, traded at 6.2505, -2.08 percent away from the midpoint.
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