China’s yuan barely moved on Wednesday as regulatory capital control measures helped cushion the usual increased demand for the dollar ahead of the Lunar New Year, traders said.
The Chinese foreign exchange market will be closed all next week for the Lunar New Year holiday, and corporates typically need dollars to cover operations during the break.
The People’s Bank of China set the midpoint rate at 6.5521 per dollar prior to market open, only 0.02 weaker than the previous fix 6.551. The spot market opened at 6.5824 per dollar and was at 6.5798 at midday, little changed from the previous close.
Trading was sluggish ahead of the long holiday, traders said.
The offshore yuan was trading at 6.6287 per dollar, 0.74 per cent weaker than the onshore spot rate.
China has taken a series of steps to stabilise its foreign exchange market, including imposing limits on cross-border flows from yuan-denominated capital pools and requiring intensified checks on related transactions.
“It’s hard to say when regulators will lift those restrictions,’’ said a dealer at an Asian bank.
“While dollar demand is capped for now, expectations of yuan depreciation may cause another surge in such demand after the holiday.’’
China has also been fighting hard to stem outflows in the past few months. In the latest move, it has put a limit on purchase of insurance products in Hong Kong using the country’s ubiquitous UnionPay credit and debit cards.
The onshore yuan remained flat against the euro at 7.1845. It eased 0.7 per cent against the Japanese yen, hovering at 5.5091 to 100 yen.