China's yuan on Monday inched up against the US dollar, which eased in global markets at the start of an event-packed week. The dollar slipped against a basket of major currencies after a G7 meeting ended in disarray and before policy meetings of the Federal Reserve and the European Central Bank.
Another market focus is a historic summit between US President Donald Trump and North Korean leader Kim Jong Un on Tuesday. Most traders do not expect the Chinese currency to be directly affected by that meeting, though Johnny Chen, a portfolio manager at NN Investment Partners in Singapore, said positive developments on the Korean peninsula "will likely strengthen the yuan, as Asian currencies would likely broadly strengthen against the dollar".
Prior to Monday's market opening, the People's Bank of China (PBOC) set the yuan's midpoint rate at 6.4064 per dollar, 61 pips or 0.1 percent weaker than Friday's fix of 6.4003.
In the spot market, onshore yuan opened at 6.4059 per dollar and was changing hands at 6.4053 at midday, 37 pips stronger than the previous late session close. The offshore yuan was 0.06 percent firmer than the onshore spot at 6.4017 per dollar as of midday.
The onshore yuan swung in a thin range of less than 40 pips on Monday morning, with volume also shrinking to $10.066 billion as of midday. Friday's full-day volume was $33.319 billion. The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 97.93, weaker than Friday's 97.94.
The global dollar index fell to 93.494 from the previous close of 93.551. Offshore one-year non-deliverable forwards contracts (NDFs), considered the best available proxy for forward-looking market expectations of the yuan's value, traded at 6.507, or 1.55 percent weaker than the midpoint.
One-year NDFs are settled against the midpoint, not the spot rate. "USD/CNY and USD/CNH are expected to fluctuate around 6.40 at the moment, continuing to run a relatively tight correlation with the euro," Gao Qi, FX strategist at Scotiabank said in a note on Monday.