SHANGHAI - The yuan closed a touch higher versus the dollar on Friday after the People’s Bank of China set a slightly stronger mid-point in the wake of a fall in the U.S. Dollar Index .
The yuan remained more than 400 pips lower than its record trading high hit on Oct. 11 right before the U.S. Senate granted approval to a bill aimed at pressing China to let the yuan appreciate faster, saying an artificially weak yuan was robbing jobs in the United States.
Traders said the market did not take Friday’s PBOC mid-point as a signal for a return of yuan appreciation because of wrangling between China and the United States over the value of the yuan on the political front.
The PBOC has set a slew of weaker mid-points since Oct. 12 in a clear expression of China’s displeasure with the U.S. Senate’s approval of the bill.
China has said the yuan’s exchange rate is not at the core of the China-U.S. trade imbalance and it has never purposefully sought trade surpluses with the United States.
“Friday’s PBOC fixing has no implication of a resumption of yuan appreciation,” said a dealer at a European bank in Shanghai. “Investors now eye a timing around the G20 summit early next month for a possible leg of yuan rise.”
Spot yuan closed at 6.3840 versus the dollar, up slightly from Thursday’s close of 6.3855. It has risen 3.22 percent so far this year and 6.93 percent since it was depegged from the dollar in June 2010.
Before trading began, the PBOC set the mid-point of the day at 6.3628, slightly stronger than Thursday’s 6.3652. The central bank uses the fixing to signal the government’s intentions for the yuan.
China had let the yuan rise as much as 4 percent versus the dollar from the beginning of this year to Tuesday last week — just ahead of the U.S. Senate’s approval of its yuan bill.
But since then, a slew of weaker PBOC mid-points have guided the yuan down more than 400 pips against the dollar compared with the currency’s peak at 6.3375 hit on Oct. 11.
In contrast with previous years, the yuan’s appreciation this year took place without U.S. prodding as China used the exchange rate to help it battle against imported inflation.
Previously, China had let the yuan appreciate more as concessions to the United States, most typically, ahead of major political events such as the meeting of the two nations’ leaders or global summits.
Such a politically-driven trend is seen returning now, with traders saying it has become increasingly difficult to predict the yuan’s movements in the future.
Based on the this pattern, some dealers speculated that China would permit a new leg of yuan appreciation around the end of October ahead of the summit of the Group of 20 major developed and emerging economies in France on Nov. 3 and 4.
Offshore, one-year dollar/yuan non-deliverable forwards (NDFs) were bid at 6.4100 in late trade, up from 6.3990 at the close on Thursday.
They implied yuan depreciation of 0.73 percent in 12 months from Friday’s PBOC mid-point, compared with depreciation of 0.57 percent they implied on Thursday.
