The yuan closed up slightly against the dollar on Tuesday as the Chinese central bank set a midpoint that was a bit stronger than expected, indicating Beijing's intention to keep the currency relatively stable despite the global slowdown, traders said.
The People's Bank of China (PBOC) appears to have intervened in trading recently whenever strong dollar purchases have pushed the yuan sharply lower, traders said, adding that secrecy imposed by the PBOC on its foreign exchange operations makes them unable to say for sure when or if intervention occurs.
Spot yuan closed at 6.3659 per dollar on Tuesday, up from 6.3714 at Monday's close. The currency has recently persistently traded below the PBOC's midpoint, which is the base rate from which the central bank allows the yuan to rise or fall 1 percent in a single day.
On Tuesday, the central bank set the yuan's midpoint at 6.3195, nearly 100 pips stronger than Monday's fix of 6.3293. Offshore one-year non-deliverable yuan forward contracts changed hands at 6.4180 on Tuesday afternoon to imply yuan depreciation of 0.81 percent against the dollar in the next 12 months based on the spot yuan's closing rate.
Offshore spot yuan was trading around 6.3655 in late trade, roughly in line with the onshore spot level. Chinese data on Tuesday showed that imports rose 6.3 percent last month from a year earlier, less than half the 12.7 percent increase forecast in a Reuters poll, as domestic demand flagged in the world's second-biggest economy.
A lack of dollar shorts also have kept the yuan under the pressure in recent months, traders said.