SHANGHAI: China's yuan was little changed at midday on Thursday, as the central bank's use of its midpoint to enforce its preference for exchange-rate stability has reduced volatility in the spot market.
Spot yuan changed hands at 6.2147 per dollar at midday, virtually unchanged from Wednesday's close of 6.2140, after trading in a very narrow range all morning.
The central bank set its midpoint slightly weaker at 6.2742 after the dollar index gained ground overnight. That caused the yuan to slide 6.2158 in early trade.
But the yuan retraced that ground after the index fell back in Asian trade to near where it was when China's onshore market closed on Wednesday.
The People's Bank of China (PBOC) has kept its midpoints in a tight range between 6.2692 and 6.2758 over the last two weeks, clearly signaling that it intends to hold the exchange rate steady amid lingering fears of an Asian currency war and signs of hot money inflows into China.
In order to maintain stability, traders suspect that the PBOC has stepped up intervention in recent months, buying dollars to prevent the yuan from appreciating too rapidly.
Intervention has occurred despite officials' repeated statements that they intend to reduce intervention.
Traders expect the yuan to fluctuate in a narrow range around 6.21 in the weeks ahead.
