The yuan closed up slightly against the dollar in both onshore spot and offshore forwards markets on Monday as data showing the US economy was slowing drove the dollar index to its lowest level in three months, diverting funds into other currencies. The People's Bank of China set a higher yuan daily mid-point versus the dollar that helped boost sentiment towards the Chinese currency, as a weakening dollar helped offset evidence that China's key manufacturing sector was slowing.
"All eyes are on the dollar's global performance for now, that that has helped offset China's weak PMI," said a dealer at an Asian bank in Shanghai. The Chinese central bank announced a depegging of the yuan to the US currency on June 19 and let the yuan appreciate as much as 0.87 percent against the dollar in the following two weeks.
But since then, the central bank has ceased to allow the yuan to appreciate by fixing a slew of weak mid-points. The yuan has now risen only 0.77 percent to the dollar since the depegging. The official purchasing managers' index (PMI) fell to a 17-month low in July of 51.2 from 52.1 in June, the China Federation of Logistics and Purchasing (CFLP) said on Sunday. Offshore, benchmark one-year dollar/yuan non-deliverable forwards were quoted bid at 6.6725 late on Monday from Friday's close of 6.6870, with their implied 12-month yuan appreciation rising to 1.52 percent from 1.32 percent.
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