WSJ:Yuan Down, but Losses Capped by Dollar Selling
China's yuan fell against the U.S. dollar late Tuesday after the central bank guided its currency much weaker, though the losses were capped by corporates' dollar selling.
On the over-the-counter market, the greenback was at CNY6.3189 around 0830 GMT, higher than Monday's close of CNY6.3173. It traded in a range of CNY6.3168 to CNY6.3250.
Ahead of trading, the People's Bank of China set the dollar/yuan central parity rate at 6.3353, higher than Monday's 6.3295 and also above the market's expectations of a tad over 6.3300.
"The PBOC set [the central parity] at a higher-than-expected level to prevent the yuan from rising too quickly, but corporates' dollar-selling flows are still strong," said a Beijing-based trader with local bank.
The Chinese currency's quick climb in the past few weeks has narrowed its loss against the U.S. dollar to 0.4% since the start of 2012. As recently as late July, that loss was much as 1.6%.
"If the central bank refuses to let the yuan rise further via the central parity, we may see investor sentiment change [to favoring the dollar] in a while," a Shanghai-based trader with a foreign bank said.
Offshore, one-year dollar/yuan nondeliverable forward contracts rose to 6.4148/6.4188 from 6.4049/6.4089 late Monday, implying a 1.5% 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 CNY6.3271, higher than CNY6.3200 late Monday.
