China’s yuan firmed against the dollar on Tuesday, in line with the central bank’s slightly stronger midpoint after Beijing pledged more policies and reforms in 2016 to support a slowing economy.
“Trading was tepid due to the Christmas holiday,’’ said a trader at a Chinese commercial bank, referring to thin market activity this week.
“Dollar-bid tone dominated the market, but purchases were not strong, so the yuan broadly moved along with the midpoint.’’ ‘
The People’s Bank of China set the yuan/dollar midpoint rate at 6.4746 per dollar prior to market open, only 0.01 per cent firmer than the previous fix of 6.4753.
The spot market opened at 6.4792 per dollar and was changing hands at 6.4782 at midday, 0.04 per cent firmer than the previous close.
China will make its monetary policy more flexible and expand its budget deficit in 2016 to support slowing growth, state media had said on Monday.
The offshore yuan was trading 1.01 per cent weaker than the onshore spot at 6.544 per dollar. On Monday, the onshore yuan was trading against the euro at 7.0734, 0.5 per cent weaker than the previous close. It weakened only 0.1 per cent against the Japanese yen to 5.3441 to 100 yen.
The yuan’s real effective exchange rate (REER) or the currency’s value against the trade-weighted basket after adjustments based on inflation rose 1.6 per cent to 131.08 in November, snapping a three-month down streak and hitting its highest on record, the BIS data issued late last week showed.