WSJ:China Yuan Down Late on Worries Over Euro Zone, Domestic Economy
Vs Parity Previous
USD/CNY Central Parity 6.3112 6.3126
USD/CNY OTC 0830 GMT 6.3735 0.99% 6.3734
High 6.3743 1.00%
Low 6.3706 0.94%
SHANGHAI--China's yuan hit the lower limit of its daily trading band against the U.S. dollar late Friday, the first time it has done so since Beijing doubled the trading range in April, as unabated worries over the euro zone and China's own economy boosted demand for the U.S. currency.
The breakthrough came after the yuan stayed just a whisker away from the lower end of the trading band in each of the past five trading sessions.
The dollar-yuan exchange rate closed at 6.3735 at 0830 GMT, a touch off the intraday high of 6.3743, the topmost the pair was allowed to hit Friday. The pair ended Thursday at 6.3734.
The rate is allowed to move 1% above or below the central parity, the daily reference level.
"The pair rose due to high dollar demand from corporates," said one local trader with a foreign bank. In each of the past five trading days, the pair has traded above 0.90% from the central parity.
"Traders are eager to hold the dollar in part because of lingering concerns about the Chinese economy, but also because they don't think the central bank will let the yuan will appreciate too much," added the trader.
"The market has not yet taken notice of the fact that the continued weakness of the [yuan] in the spot market onshore [against the mid-point fix] is telling us something about China," said David Pavitt, head of emerging markets FX trading at HSBC in London. "Although reserves are ample, it is clear from the price action that capital outflow is occurring and the market isn't, at this stage, as focused on it as perhaps it should be."
One trader estimated that the yuan still has 0.4% to fall before the year's end. The currency has already declined 1.3% in the year to date.
The dollar-yuan pair rose even as the central bank tried to guide it slightly lower earlier. The People's Bank of China set the dollar/yuan central parity rate at 6.3112 Friday, lower than Thursday's 6.3126.
The yuan will continue to depreciate against the dollar in the second half of this year, the China Securities Journal reported Friday, citing Liu Yuhui, director of a financial research unit at the Chinese Academy of Social Sciences. At the same time, Mr. Liu said related government bodies would intervene to maintain the yuan at a relatively steady level.
Offshore, one-year dollar/yuan nondeliverable forward contracts rose to 6.4150/6.4180 from 6.4120/6.4150 late Thursday, implying a 1.9% fall by the yuan over the next year.
In the offshore yuan market in Hong Kong, where the Chinese currency floats freely, the dollar was at CNY6.3715 late Friday, higher than CNY6.3695 late Thursday.
