The yuan jumped in late offshore trade on Monday on suspected intervention by Chinese state banks on behalf of the central bank but the onshore spot yuan closed weaker. Traders said the onshore spot yuan weakened because the People's Bank of China set the yuan's official midpoint at a three-month low while refraining from acting to support it in intraday trading.
The sharp moves come just as the International Monetary Fund looks set to approve the inclusion of the yuan in its reserve currency basket when it meets on Monday in what is seen as symbolic coming of age for the world's second-biggest economy. The offshore yuan opened at 6.4515 per dollar, its lowest level in 3 months and priced at a deep discount to the onshore rate -
a situation the central bank has resisted in the recent past after an unexpected devaluation in August had prompted market speculation of more yuan weakness. It shortly hit an intraday low of 6.4061 before what traders suspected was intervention by Chinese state banks that pushed it to an intraday high of 6.4230 just ahead of the midday break. It largely traded narrowly afterwards and was moving around 6.42 in late trade, strengthening about 0.3 percent from Friday's close. The offshore yuan is set to see the biggest daily gain in a month if it keeps strengthening by the end of the trade day.
The anticipated IMF approval will place the yuan on a par with the US dollar, Japanese yen, British pound and euro. In the onshore market, the People's Bank of China set the midpoint rate at 6.3962 per dollar prior to market open, 0.07 percent weaker than the previous fix 6.3915. The spot market opened at 6.3970 per dollar and closed at 6.3981, 0.05 percent weaker from the previous close. These movements narrowed the discount of the offshore and onshore yuan to 0.50 percent from the onshore spot by 0830 GMT.
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