The yuan was little changed against the dollar on Thursday, following heavy intervention by state-owned banks the past few sessions, as market players stayed on the sidelines before the G20 finance chiefs’ meeting that China is hosting.
The Group of 20 finance ministers and central bankers meeting will be in session starting Friday with Brexit fallout and dwindling policy options to boost global growth expected to dominate talks.
Prior to Thursday’s opening, the People’s Bank of China set the midpoint rate at 6.6872 per dollar, 0.11 percent firmer than the previous fix 6.6946. Traders said Thursday’s midpoint was within expectations after the PBOC unexpectedly firmed the official guidance rate on Wednesday, leaving the market confused.
The spot yuan opened at 6.6818 per dollar and was changing hands at 6.6780 at midday, firming 0.02 percent from the previous close. “Trading was rather tepid in the morning,” said a trader at a Chinese commercial bank in Shanghai. “We do not dare to buy dollars.”
Over the past few sessions, state-owned banks engaged in aggressive dollar-selling activities on behalf of the central bank, to ensure that the yuan was stronger than the 6.7/dollar level breached early this week.
The offshore yuan was trading less than 50 pips softer than the onshore spot at 6.6825 per dollar, after having firmed a solid 0.5 percent on Wednesday. The narrowed spread suggested eased depreciation pressure on the Chinese yuan.
The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 96.07, firmer than the previous day’s 95.92.
The global dollar index tracking the greenback against a basket of major currencies fell to 97.072 from the previous close of 97.201.