China’s yuan firmed against the dollar for a fourth day after the central bank fixed a stronger midpoint on Friday, while suspected intervention by the central bank also lent support.
Trading picked up in the morning and is expected to remain active for the reminder of the day, traders said.
“Recently state banks like ABC and ICBC have been constantly intervening in the currency market to support the yuan,’’ said a dealer at a Chinese commercial bank in Shanghai.
Agricultural Bank of China (ABC) and Industrial and Commercial Bank of China (ICBC), two of the major state-owned banks, typically engage in activities to keep the yuan stable on behalf of the central bank.
The People’s Bank of China set the midpoint rate at 6.5284 per dollar prior to market open, 0.20 per cent firmer than the previous fix of 6.5412, reflecting the dollar’s weakness in global markets.
The dollar index against a basket of currencies led by the euro dropped 0.6 per cent on Thursday.
Spot yuan opened at 6.5280 per dollar and hit an intraday high of 6.5099 around 11:30 a.m. local time (0330 GMT), apparently supported by state-bank dollar sales.
It trimmed some gains to change hands at 6.5156 as the suspected intervention eased, traders said, still up 0.3 per cent from the previous close.
The Chinese currency is set to strengthen 0.4 per cent this week if it closes at the midday level.
Despite the yuan’s steadiness in the past week, a Reuters poll suggests the currency faces further depreciation pressure due to the uncertainties surrounding the health of the world’s second-largest economy.
The yuan is expected to weaken some 3.5 per cent against the US dollar over the coming year, but analysts also said they do not expect the central bank to sharply devalue the currency in coming months.
Offshore yuan was trading 0.12 per cent weaker than the onshore spot at 6.5078 per dollar. The onshore yuan softened 0.1 per cent against the euro by midday at 7.1381. It firmed 0.2 per cent against the Japanese yen, hovering at 5.7320 to 100 yen.