China’s yuan softened against the dollar on Tuesday after the central bank fixed a weaker midpoint, but traders expect it to remain largely steady ahead of a meeting of G20 finance ministers and central banks in Shanghai later this week.
The People’s Bank of China set the midpoint rate at 6.5273 per dollar prior to the market open, 0.17 per cent softer than the previous fix 6.5165.
The spot market opened at 6.5289 per dollar and was changing hands at the same rate by midday, easing 0.09 per cent from the previous close.
“Trading was quite stable just like yesterday,’’ said a trader at a Chinese commercial bank in Shanghai.
“Market rates were in line with the central bank’s midpoint and are likely remain so for the rest of the week.’’
The offshore yuan was trading at 6.5332 per dollar, within 50 pips from the onshore spot.
The onshore yuan strengthened 0.3 per cent against the euro by midday at 7.2105. It weakened 0.8 per cent against the Japanese yen, hovering at 5.8195 to 100 yen.
Surprise devaluation
The yuan has come under stronger depreciation pressure since the PBOC’s surprise devaluation of the currency last August, with worries about China’s slowing economy growth and increasing capital outflows adding to market views that authorities are likely to allow it to weaken further, despite repeated assurances from officials that they see no reason for further declines.
On Monday, China’s top leaders had pledged to keep economic growth within a reasonable range this year in a meeting of the Politburo chaired by President Xi Jinping.
Also on Monday, data from the State Administration of Foreign Exchange showed that net foreign direct investment from overseas investors in China’s financial institutions decreased by over 90 per cent quarter-on-quarter to 1.1 billion yuan ($168 million) in the fourth quarter of 2015.