China's yuan was little changed against the dollar in onshore trade on Tuesday despite the central bank's setting of a softer midpoint, but edged lower offshore to converge with levels on the mainland. The People's Bank of China set the midpoint rate at 6.4971 per dollar prior to the market open, 0.23 percent weaker than the previous fix of 6.4824.
In the spot market, yuan opened at 6.4969 and was changing hands at 6.4905 at midday, almost unchanged from the previous close. Onshore one-year yuan/dollar deliverable forwards were quoted at 6.5535 around midday, implying expectations of a bigger depreciation over 12 months than seen in Monday's close of 6.5405. "There was a bout of dollar buying in early trade, but state banks kept defending the yuan around the midpoint, so the market soon resorted to dollar selling," said a trader at a European bank in Shanghai.
The offshore yuan converged with its onshore counterpart trading at 6.4901 per dollar. Offshore one-year non-deliverable forwards contracts , considered the best available proxy for forward-looking market expectations of the yuan's value, traded at 6.6555, 2.38 percent weaker than the midpoint. Since early 2016, state-owned banks have routinely intervened in the currency market to support the yuan on behalf of the central bank. Vice Finance Minister Zhu Guangyao said on Tuesday there was no secret agreement between the United States and China regarding adjustments to exchange rates.