China's yuan stayed flat against the dollar on Thursday as dollar supply and demand was roughly balanced out by sales from industrial companies on the one hand and massive purchases by several large Chinese banks on the other, traders said. Spot yuan stood at 6.2037 per dollar at midday, up a mere 0.02 percent from Wednesday's close.
The People's Bank of China (PBOC) fixed its official midpoint at 6.1564 per dollar, down 0.05 percent from Wednesday. Thursday was the fifth straight trading day on which the PBOC has fixed the official rate slightly lower and traders said that implied the monetary authorities wanted to keep the yuan just weaker than the psychologically important 6.20 level for now.
"The market opened at a relatively high price, encouraging corporates to sell dollars, but some large Chinese banks came in to buy dollars later, which offset the corporate dollar sales," said a trader at a Chinese commercial city bank in Shanghai. Big dollar purchases by major state-owned banks often indicate the PBOC is using the banks to intervene in trading to influence the yuan's value, although traders said they were not certain this was the case on Thursday.
Still, traders pointed out the central bank has recently loosened its controls over the market to allow the yuan to be more market-determined as a steep yuan depreciation earlier this year has helped bring dollar supply and demand roughly into balance. Data on Wednesday from the Bank for International Settlements (BIS) showed the Chinese currency began stabilising in June after falls in the first five months of this year.