China's yuan inched up against the dollar on Tuesday after the central bank set a firmer midpoint and was also suspected of selling dollars via state banks to support the Chinese currency, traders said. The People's Bank of China set the midpoint rate at 6.366 per dollar prior to market open, 0.11 percent firmer than the previous fix at 6.3729. "The central bank appeared to be persistently intervening this morning by selling dollars," said a trader at a Chinese commercial bank in Shanghai.
The strong fix and intervention supported the yuan in spot market trade. It opened at 6.3657 per dollar and was changing hands at 6.3641 at midday, 0.08 percent firmer than the previous close. The onshore yuan was also buoyed by the overnight strength of the offshore yuan on broad dollar weakness, traders said. The offshore yuan, trading at 6.3695 per dollar by midday, slipped 0.2 percent on Tuesday after gaining 0.6 percent overnight.
That pushed the discount of the offshore yuan against the onshore yuan to only 0.08 percent, the least since the Chinese central bank abruptly devaluated the yuan in mid-August. The discount had widened to nearly 2 percent in the days following the devaluation because of widespread expectations of more downside for the Chinese currency in the long run.