China's yuan firmed on Thursday as state-owned banks sold dollars on behalf of the central bank, offsetting a slightly weaker official guidance rate. Traders said that they saw a relatively large amount of dollar sales by the state-owned banks. The central bank typically uses these banks to trade on behalf of itself to influence the yuan's value.
"The midpoint is only set slightly weaker today," said a trader at a Chinese commercial bank in Shanghai. "Plus signs of central bank intervention in trading, the market believes the authorities may want to keep the yuan stable in the near term." The People's Bank of China (PBOC) set the midpoint rate at 6.3791 per dollar prior to market open, 0.03 percent weaker than the previous fix of 6.3773.
In the spot market, the yuan opened at 6.3829 per dollar and was changing hands at 6.3793 at midday, 0.07 percent firmer than the previous close. Trader said that they believed the central bank would hold the yuan around 6.38. Despite Thursday's activity, the PBOC has generally scaled back onshore intervention in recent weeks, following a rapid-fire series of support moves after its surprise devaluation of the yuan in mid-August. The offshore yuan was trading 0.84 percent weaker than the onshore spot at 6.4332 per dollar. Offshore one-year non-deliverable forwards contracts, considered the best available proxy for forward-looking market expectations of the yuan's value, traded at 6.6105, or 3.50 percent weaker than Thursday's the midpoint.
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