China’s yuan edged up against the dollar on Wednesday, shrugging off the decision by rating agency Moody’s to downgrade the outlook for Chinese sovereign debt.
Moody’s changed its outlook on Chinese government debt to “negative” from “stable”, citing uncertainty over authorities’ capacity to implement economic reforms, rising government debt and falling reserves.
A trader from a Chinese commercial bank said recent interventions by state banks on behalf of the People’s Bank of China (PBOC) “have really dampened the market mood as it sees no chance of big yuan swings under the PBOC’s firm hand.”
Traders said Tuesday’s muscle-flexing by the central bank, guiding the midpoint stronger to offset the impact from weak manufacturing activity and an easing move, signalled that it is capable of maintaining the yuan’s stability in a volatile economy.
On Wednesday, the central bank set the midpoint rate at 6.549 per dollar prior to market open, the softest in a month, and 0.16 percent weaker than the previous fix 6.5385.
In the spot market, yuan opened at 6.5530 per dollar and was changing hands at 6.5517 at midday, 0.03 percent firmer than the previous close.
The offshore yuan converged with its onshore counterpart by midday, with both trading at 6.5517 per dollar. Onshore yuan softened 0.1 percent against the euro by the lunch time at 7.1186. It strengthened 0.5 percent against the Japanese yen, hovering at 5.7560 to 100 yen.