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China’s yuan stayed flat against the dollar on Thursday after the central bank set the midpoint rate slightly firmer for the fifth consecutive day and dollar demand was tepid.
Traders said there was no strong demand for dollar even as the dollar firmed. The overnight dollar index was up 0.1 per cent on Thursday after easing 0.5 per cent the previous day.
The change in the index came after the Federal Reserve offered little in the way of surprises, suggesting its concern about global events had diminished but not squashed the chances of a rate increase in March.
The People’s Bank of China set the midpoint rate at 6.5528 per dollar prior to market open, 0.01 per cent firmer than the previous fix 6.5533.
The spot market opened at 6.5780 per dollar and was changing hands at 6.5777 at midday, almost unchanged from the previous close.
“Trading remained steady as the central bank kept defending the line on midpoint,’’ said a trader at a foreign bank in Shanghai.
“There is no surge in dollar demand yet though the dollar index went up.’’
China PMI
Traders said yuan market sentiment was cautious partly ahead of Chinese January economic data starting in early February, such as China’s Purchasing Managers’ Index (PMI) due on February 1.
“So long as the data does not slide dramatically, I think the yuan will remain stable,’’ said the same trader.
The official manufacturing PMI likely edged down to 49.6 in January from December’s 49.7, according to a median forecast of 20 economists in a Reuters poll.
On Thursday, offshore yuan was trading 0.52 per cent softer than the onshore spot rate at 6.6121 per dollar.
The spread between the onshore and offshore market appeared to have widened in the past week. Still, traders expected the central bank will continue to signal stability for both markets until the Lunar New Year in early February.
The spread between the two markets almost converged two weeks ago. The onshore yuan weakened 0.2 per cent against the euro to 7.1653. It firmed 0.4 per cent against the Japanese yen, hovering at 5.5417 to 100 yen.
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