China’s yuan weakened marginally on Thursday as traders took profits on early gains, despite the People’s Bank of China setting a firmer fix. The PBOC set the midpoint rate at 6.6255 per dollar prior to market open, firmer than the previous fix 6.653.
The yuan was up slightly in early morning trade on a stronger midpoint fixing by the central bank, but weakened in the late morning in what traders said was mild profit taking.
Analysts were mostly sanguine on the yuan’s trajectory a year after an unexpected 1.8 percent devaluation which set off six months of strong capital outflows and caused deep concern in overseas markets on the health of China’s economy and sparked concerns of competitive devaluations.
“In the past year, CNY depreciated by 6.9 percent against the USD, and weakened by more than 10 percent versus a basket of currencies,” said Zhou Hao, Senior Emerging Markets Economist at Commerzbank in Singapore.
“CNY has stabilized somewhat recently as capital outflows have eased and the market has adjusted the expectations on Fed’s rate hike process. Of course, the strict capital control measures have been working, which implies that China’s capital account liberalization is still far away from us.
” The spot market opened at 6.6359 per dollar and was changing hands at 6.6429 at midday, 29 pips away from the last close and 0.26 percent away from the midpoint. The spot rate is currently allowed to trade with a range 2 percent above or below the official fixing on any given day.