HONG KONG: China's yuan held steady against the dollar on Thursday after the central bank set a stronger midpoint to reflect weakness in the dollar index, with currency markets waiting for US payroll figures at the end of the week for more direction.
The People's Bank of China set the midpoint rate at 6.1396 per dollar before the market opened, firmer than the previous fix of 6.1434.
The yuan in the spot market opened at 6.1945 per dollar and was changing hands at 6.1974 near midday, 6 pips stronger than the previous close and 0.94 percent weaker than the midpoint.
It traded in a very tight range between 6.1988 and 6.1940 in morning trade.
The spot rate is allowed to trade within a range 2 percent above or below the official fixing each day.
The dollar nursed modest losses on Thursday, having suffered a setback on fresh signs that the US economy slowed significantly in the first quarter, which could delay the Federal Reserve's decision to start raising interest rates.
The offshore yuan was trading 0.12 percent weaker than the onshore spot at 6.2048 per dollar.
Offshore one-year non-deliverable forward contracts (NDFs), considered the best available proxy for forward-looking market expectations of the yuan's value, traded at 6.318, or 2.82 percent weaker than the midpoint.
One-year NDFs are settled against the midpoint, not the spot rate, and now that the trading band has been widened to 2 percent in either direction, companies are much warier of using the NDF to hedge, given the risk inherent in them.
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