China's yuan was almost unchanged at midday Tuesday as state-owned banks sold dollars to offset companies' strong demand for them, curbing losses the Chinese currency had in early trade. "Some state-owned banks sold dollars after a bout of dollar purchases by companies," said a trader at a Chinese commercial bank in Shanghai. The Chinese currency has been periodically supported by state-owned banks' dollar sales on behalf of the central bank since the yuan's devaluation on August 11. But traders were unsure of the sales this morning were instructed by the central bank.
The People's Bank of China (PBOC) set the midpoint rate at 6.331 per dollar prior to market open, 0.25 percent weaker than the previous fix of 6.3154. The spot market opened at 6.3346 per dollar and was changing hands at 6.3372 at midday, only 0.01 percent firmer than the previous close. On Monday, the PBOC raised the midpoint fixing of the yuan by the most in a single day since the landmark revaluation of the currency in 2005.
The offshore yuan was trading 0.11 percent weaker than the onshore spot at 6.3442 per dollar. "The midpoint moved up and down more sharply of late, indicating that the yuan was trading more dynamically intraday," said Li Liuyang, an analyst at the Bank of Tokyo-Mitsubishi (UFJ) in Shanghai.
The yuan firmed 0.6 percent on Friday and weakened 0.3 percent on Monday. "Despite occasional intervention, the yuan was trading more freely based on the market, which might help push it to be included into the SDR basket," Li said. The International Monetary Fund's executive board is scheduled to decide this month whether to put the yuan on a par with the dollar, yen, euro and pound, known as the Special Drawing Rights (SDR) basket.