China's yuan weakened slighly on Thursday after reforms to further open the onshore repurchase agreement (repo) market to foreigners, but analysts expect the currency to remain range bound for the next few months ahead of an International Monetary Fund review. The People's Bank of China set the midpoint rate at 6.1164 per dollar prior to market open, firmer than the previous fix at 6.1176.
Yuan in the spot market opened at 6.1981 per dollar and was changing hands at 6.1986 at midday, 10 pips weaker than the previous close and 1.34 percent away from the midpoint. The spot rate is allowed to trade with a range 2 percent above or below the official fixing on any given day. The currency showed little reaction to an announcement by the PBOC late on Wednesday that offshore yuan clearing and participating banks could enter the bond repurchase agreement business in the onshore interbank bond market, although analysts flagged the move as another step towards full yuan internationalisation.
China's yuan has been in a tight trading range between 6.18 and 6.22 to the dollar since mid-March, when the currency staged a roughly 1 percent rally. Since that time the currency has mostly traded just above its 200-day moving average of 6.18 against the greenback. The offshore yuan was trading -0.04 percent away from the onshore spot at 6.2009 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 6.237, -1.93 percent away from the midpoint.