China's yuan inched up against the dollar on Monday, but gains were capped as companies increased their purchases of the US currency, traders said. The dollar was steady against a basket of six currencies on Monday morning after falling to its lowest since late September on Friday as markets awaited congressional hearings on Fed Chair nominee Jerome Powell and progress on US tax reform, traders said.
At midday, the global dollar index was unchanged from the previous close at 92.782. It hit a near two-month low of 92.675 on Friday. Prior to market opening on Monday, the People's Bank of China set the yuan's midpoint rate at 6.5874 per dollar, 64 pips or 0.1 percent weaker than Friday's fix of 6.5810.
In the spot market, the onshore spot yuan opened at 6.5970 per dollar and was changing hands at 6.5996 at midday, 32 pips firmer than the previous late session close and 0.19 percent softer than the midpoint. Traders said the yuan continued to track the dollar's global trend, though buying of the greenback amid its broad weakness contained gains for the Chinese currency. Tommy Xie, economist at OCBC in Singapore, said in a note on Monday.
The onshore yuan strengthened around 0.39 percent against the dollar last week, registering the best week since mid-October, but on a trade-weighted basis it eased about 0.03 percent against a basket of currencies of trading partners in the same period, according to official data from the China Foreign Exchange Trade System (CFETS).
The index, published on a weekly basis, stood at 94.67 on Friday. The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 95.21, weaker than the previous day's 95.28.
The offshore yuan was trading 0.01 percent firmer than the onshore spot at 6.5988 per dollar. Offshore one-year non-deliverable forwards contracts (NDFs), considered the best available proxy for forward-looking market expectations of the yuan's value, traded at 6.7485, 2.39 percent weaker than the midpoint. One-year NDFs are settled against the midpoint, not the spot rate.
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