China's yuan was flat against the dollar on Friday as a wave of dollar demand by big state-owned Chinese banks and oil companies helped to offset a three-month high midpoint, traders said. The People's Bank of China (PBOC) set the midpoint rate at 6.1241 per dollar prior to market open, the yuan's strongest level since January 20, or 0.07 percent firmer than the previous fix at 6.1281.
Following the strong fix, the spot market opened at 6.1935 per dollar, but surrendered some gains to change hands at 6.1979 at midday, no change from the previous close. "Some state-owned banks and oil companies were seen buying dollars and that pushed down the yuan over the course of this morning," said a trader at a Chinese city commercial bank in Shanghai.
He added corporate dollar demand normally rises during the end of a month. China's oil firms, particularly PetroChina and Sinopec Corp are primary dollar buyers on the domestic market as the oil trade is still done mostly in dollars. China relies on imports for more than half of its crude oil needs. For the week, the currency is likely to end flat if it closes at the midday level.
China's central bank cut banks' reserve requirement ratios by 100 basis points to 18.5 percent on April 19. Traders expected the yuan to move between 6.18-6.21 per dollar level in the short term. The offshore yuan was trading 0.07 percent stronger from the onshore spot at 6.1938 per dollar.