China’s yuan eased against the dollar on Monday after the central bank set a softer midpoint a day after Chinese officials gave fresh assurances that concerns about the country’s economy and capital outflows are declining.
The People's Bank of China set the midpoint rate at 6.4824 per dollar prior to market open, 0.3 per cent weaker than the previous fix of 6.4628.
In the spot market, the yuan opened at 6.4837 per dollar and was changing hands at 6.4834 at midday, easing 0.16 per cent from the previous close.
Traders said the latest official comments playing down the possibility of the yuan depreciation had no impact on Monday activity.
On Sunday, central bank governor Zhou Xiaochuan had said capital outflows from China have showed a significant easing, citing an abating of concerns about a slowdown in the world’s second-largest economy.
Chinese leaders have repeatedly tried to reassure jittery financial markets and their major trading partners that Beijing is able to manage the slowing economy, following a slide in the country’s stock market and depreciation of the yuan.
“The spot was trading a bit weaker than the midpoint,’’ said a dealer at a Chinese commercial bank in Shanghai.
“But state banks kept defending the yuan at 6.4850, so the yuan wasn’t able to cross that line in the morning.”
Since early 2016, state-owned banks have routinely intervened in the currency market to support the yuan on behalf of the central bank.
Onshore one-year yuan/dollar deliverable forwards were quoted at 6.5352 around midday, implying a bigger depreciation over 12 months than seen in Friday’s close of 6.5160.
The latest China Foreign Exchange Trade System data showed that the index for the yuan’s value based on the market’s trade-weighted basket had its third straight decline last week, to 98.05, or down 0.78 per cent from the week of March 7-11.
On Monday, the onshore yuan stayed flat against the euro by midday at 7.3136. It weakened 0.3 per cent against the Japanese yen, hovering at 5.8232 to 100 yen. The offshore yuan was trading 0.10 percent stronger than its onshore counterpart at 6.4769 per dollar.
The spread between those two expanded in the last three trading days as the offshore was more responsive to the sliding of the dollar, but it soon narrowed in Monday's morning trade.