SHANGHAI, Oct 23 (Reuters) - The yuan inched higher against the dollar on Friday as comments by regulators appeared to show increasing tolerance for a stronger currency.
Investor concerns over possible central bank intervention to rein in recent yuan gains were eased after Wang Chunying, the spokeswoman for the State Administration of Foreign Exchange (SAFE), said the yuan has been more stable than expected and has maintained relatively high flexibility.
She expected the yuan "to remain stable at a reasonable and balanced level".
"While some of the comments refer to what had happened, overall these headlines may still be taken as reflecting a lack of discomfort over RMB strength, in particular the opinion that there is fundamental support and that the RMB movement has been 'reasonable'," said Frances Cheung, head of macro strategy for Asia at Westpac in Singapore.
Prior to the market opening on Friday, the People's Bank of China (PBOC) set the midpoint rate CNY=PBOC at 6.6703 per dollar, snapping a six-straight-day winning streak, and was 147 pips or 0.22% weaker than the previous fix of 6.6556.
Unlike slightly weaker-than-expected fixings set on Wednesday and Thursday, Friday's official guidance came in marginally firmer than market projections of 6.6735.
In the spot market, onshore yuan CNY=CFXS opened at 6.6775 per dollar and was changing hands at 6.6828 at midday, 22 pips firmer than the previous late session close.
If the yuan finishes the late night session at the midday level, it would have gained 0.24% for the week and appreciated more than 6% to the dollar since late May.
"Strong fundamental support, PBOC's explicit more tolerance of RMB appreciation and increased flexibility, and the absence of further escalation of U.S.-China tension in the near term should help push CNY stronger in the remainder of this year," said Wang Tao, chief China economist at UBS.
A raft of recent data showed China's economic recovery accelerated in the third quarter as consumers shook off their coronavirus caution.
However, several currency traders pointed out that intraday gains in the yuan were capped by corporate dollar buying, as some commercial banks recommended their clients who have dollar needs could purchase the greenback ahead of the Nov. 3 U.S. presidential election.
The global dollar index =USD rose to 93.045 at midday, when the offshore yuan CNH=D3 was trading at 6.6733 per dollar.
The yuan market at 0401 GMT:
PBOC midpoint CNY=SAEC
Spot yuan CNY=CFXS
Divergence from midpoint*
Spot change YTD
Spot change since 2005 revaluation
Thomson Reuters/HKEX CNH index
*Divergence of the dollar/yuan exchange rate. Negative number indicates that spot yuan is trading stronger than the midpoint. The People's Bank of China (PBOC) allows the exchange rate to rise or fall 2% from official midpoint rate it sets each morning.
OFFSHORE CNH MARKET
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