ET:Yuan ends lower after dollar rebounds during Chinese holiday
SHANGHAI: The yuan closed lower on Monday after the People's Bank of China (PBOC) set a slightly weaker midpoint to reflect the dollar's gains in global markets during a long Chinese holiday last week for the Lunar New Year, traders said.
Spot yuan finished at 6.2427 per dollar, losing 0.16 per cent from 6.2325 at the close on Feb. 8, the last trading day before the holiday. Volume was average at $13.72 billion on Monday, recovering from a pre-holiday thin $6.31 billion on Feb. 8.
Before trading began, the People's Bank of China (PBOC) set a weaker midpoint, down 0.04 per cent from the previous trading day, reflecting but lagging behind a 0.45 per cent rise in the dollar index during the Chinese holiday.
At the weekend, a statement issued by G20 policymakers did not single out Japan for its intervention to devalue the yen , although it said members should refrain from competitive devaluations and that monetary policy should be directed only at price stability and growth.
"The G20's decision not to single out Japan for adopting policies that weakened the yen may mean further softening in Asian currencies in the near term," said a trader at a Chinese commercial bank in Shanghai.
"If this is the case, the yuan may eventually succumb to pressure for depreciation from other Asian currencies."
For now, however, the yuan was supported by adequate dollar supply from China's healthy trade in January, traders said.
Right before the holiday, customs data showed China's exports in January grew 25 per cent from a year earlier, the strongest showing since April 2011 and well ahead of market expectations for a 17 per cent rise.
That helped boost the country's trade surplus to $29.2 billion in January, compared with a forecast of $22.0 billion and December's $31.6 billion.
OFFSHORE CNH MARKET
The offshore yuan traded in Hong Kong (CNH) remains at a premium to the onshore version. Analysts say this is partly due to the fact that the offshore yuan is not bound by the official midpoint, which keeps the exchange rate within 1 per cent on either side of the fix.
One-year non-deliverable forwards, considered an imperfect indicator of future expectations for yuan appreciation or depreciation, were quoted at rates implying depreciation over the next 12 months.
