China’s yuan barely moved against the dollar on Thursday, holding largely steady in the week as efforts by authorities to quell speculation of a sharp depreciation appeared to pay off for now.

Still, the forward markets showed lingering expectations among traders for a further downturn in the yuan in coming months.

Yuan midpoint rate

The People’s Bank of China (PBOC) set the midpoint rate at 6.5585 per dollar prior to the market’s open, only 0.01 per cent weaker than the previous fix 6.5578.

The spot market opened at 6.5792 per dollar and was changing hands at 6.5795 at midday, 10 pips or 0.02 per cent softer than the previous close. The yuan’s spot rate has been moving within a tight 70 pips range over the past week.

Traders attributed the relative stability to the PBOC’s recent aggressive steps to deter speculators from shorting the yuan, which has fallen 2.8 per cent since November 30 when the currency was admitted to the International Monetary Fund’s benchmark basket.

On Wednesday, the central bank had said that it would improve policy coordination to promote economic growth and curb financial risks, though it provided no details on steps or timing.

Offshore yuan

As authorities clamped down on speculative selling of the yuan’s offshore unit, its non-deliverable forwards (NDF) market has become an easier and cheaper alternative for punters.

The offshore yuan was trading 0.42 percent softer than the onshore spot at 6.6072 per dollar. The three-month dollar/yuan NDFs, however, is pricing the yuan to decline around 2 per cent from current levels towards the end of April.

“The market is betting on the yuan fixing flatlining for at least two months and then a big depreciation, just like in August,’’ said one emerging market currency trader in Singapore.

On Thursday, the onshore yuan strengthened 0.2 per cent against the euro to 7.1562. It also firmed 1.0 per cent against the Japanese yen, hovering at 5.6056 to 100 yen.

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