China’s yuan weakened on Friday as the dollar rebounded globally for the second day overnight, but traders said sentiment towards the Chinese currency remained stable after the central bank had intervened to support of late. “Dollar demand remains strong, but state banks have been continuously offering dollar liquidity on behalf of the central bank of late,” said a senior dealer at a European bank in Shanghai.
“Still, the central bank appears to be intervening in trading less this week than the previous two weeks, letting the market have a bigger say in the yuan’s value as the currency stabilises.” The People’s Bank of China (PBOC) set the midpoint rate at 6.6406 per dollar prior to market open, firmer than the previous fix 6.6444. The spot market opened at 6.6420 per dollar and was changing hands at 6.6446 at midday, 20 pips away from the previous close and 0.06 per cent away from the midpoint. Globally, the dollar held firm ahead of the US employment data.
If the yuan closes at the midday level, it would have weakened 0.1 per cent for the week.’ Since the yuan slipped through the psychologically important 6.7/dollar level on July 18, it has rebounded 0.7 per cent as the PBOC stepped in to control the pace of depreciation. Bearish bets on the yuan were seen to fall to the lowest in more than three-month low in the last two weeks as the central bank stabilised the currency after it fell through the key psychological level, a Reuters poll published on Thursday showed.