Yuan inches lower, losses capped by regulator's stability pledge

Credit: REUTERS/Petar Kudjundzic

China's yuan inched lower against the U.S. dollar on Thursday, reflecting a rise in the greenback overseas, but comments from regulators on keeping the local currency stable stopped it from sinking further.

SHANGHAI, June 13 (Reuters) - China's yuan inched lower against the U.S. dollar on Thursday, reflecting a rise in the greenback overseas, but comments from regulators on keeping the local currency stable stopped it from sinking further.

Pan Gongsheng, head of the State Administration of Foreign Exchange, reiterated at a forum that China is capable and confident of maintaining the stable operation of foreign exchange markets and keeping the yuan "basically stable at reasonable and balanced levels".

The comments, along with another stable midpoint fixing on Thursday, prevented the spot rate from falling further, said one trader at a Chinese bank, following remarks from the central bank governor last week that some yuan flexibility is good.

Asked about a red line for the yuan, Yi Gang also reportedly said no number was more important than another, stirring speculation over how much depreciation Beijing may allow to offset the impact of higher U.S. tariffs.

Prior to the market opening on Thursday, the People's Bank of China (PBOC) set its daily midpoint fixing almost unchanged from the previous one, a trend that has persisted over the past few weeks.

The PBOC set the midpoint rate CNY=PBOC at 6.8934 per dollar prior to market open, only 2 pips weaker than the previous fix of 6.8932.

Despite the "apparent" change in tone by Governor Yi about the importance of the 7 per dollar threshold, "the recent fixings appear to indicate a continued desire to maintain currency stability," economists at Goldman Sachs said in a note.

Fixings have also persistently come in stronger than market consensus. On Thursday, the official guidance rate was 204 pips higher than Reuters estimate of 6.9138.

In the spot market, the onshore yuan CNY=CFXS opened at 6.9180 per dollar and was changing hands at 6.9215 at midday, 27 pips weaker than the previous late session close.

Yuan traders said profit-taking in the greenback emerged after the spot rate rose past 6.92 per dollar, a level that many investors believe as a floor for the yuan for now as many senior officials sent warnings to support the yuan at such prices.

A second trader at a Chinese bank said the market widely expects the spot rate to stay stable and consolidate in a range of 6.9 to 6.92 before the G20 summit in Japan later this month, when U.S. President Donald Trump is expected to meet China's President Xi Jinping amid escalating trade tensions between the world's largest economies.

Vice Premier Liu He said on Thursday that regulators should step up support for the economy and keep ample liquidity in the financial system,, suggesting Beijing would soon unveil more policies to bolster growth amid rising U.S. trade pressure.

The offshore yuan CNH=D3 was trading at 6.9312 per dollar at midday.

The yuan market at 0405 GMT:






PBOC midpoint CNY=SAEC




Spot yuan CNY=CFXS




Divergence from midpoint*


Spot change YTD


Spot change since 2005 revaluation


Key indexes:





Thomson Reuters/HKEX CNH index




Dollar 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 percent from official midpoint rate it sets each morning.




Difference from onshore

Offshore spot yuan CNH= *



Offshore non-deliverable forwards CNY1YNDFOR= **



*Premium for offshore spot over onshore CNY=CFXS

**Figure reflects difference from PBOC's official midpoint, since non-deliverable forwards are settled against the midpoint. CNY=SAEC.

(Reporting by Winni Zhou and David Stanway; Editing by Kim Coghill)

((winni.zhou@thomsonreuters.com; +86 21 2083 0100; Reuters Messaging: winni.zhou.thomsonreuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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