BT:China sets cheaper yuan on dollar spike, but market unimpressed
[SHANGHAI] China's central bank guided the yuan into weaker territory on Monday after the dollar index showed signs of a bullish breakout, but traders said market sentiment remains focused on the impact of speculative inflows.
The People's Bank of China (PBOC) set the official midpoint at 6.2072, weakening it for a second consecutive session after an all-time record high on Thursday.
But the spot yuan remained bullish, pushing the yuan close to its strongest allowable level at 6.1476 per dollar, 0.95 per cent away from the dollar, and intra-day volatility was minimal, contained within a 21 pip range.
The exchange rate is currently only allowed to rise or fall by 1 per cent away from the midpoint on any given day, but bullish sentiment has helped keep the exchange rate glued to the strong side of the band in 2013, effectively eliminating intra-day volatility.
