China's yuan weakened slightly on Monday as banks squared their books ahead of a long national holiday and the end of the quarter.
China’s yuan weakened slightly on Monday as banks squared their books ahead of a long national holiday and the end of the quarter. The People’s Bank of China set the midpoint rate at 6.6744 per dollar prior to the market open, weaker than the previous fix of 6.667.
In the spot market, the yuan opened at 6.6701 per dollar and was changing hands at 6.6701 at midday, 3 pips weaker than the previous late session close and 0.06 percent firmer than the midpoint. “Some big state banks were selling their greenback positions to make the yuan hover at around the 6.67 level, while companies were making dollar purchases in the morning,” said a trader at a foreign bank in Shanghai. “Such a situation may persist till the end of this week,” the trader added. Traders said state-owned banks want to stabilise the currency ahead of Oct. 1, which marks both the start of the week-long National Day holiday and the yuan’s official inclusion into the International Monetary Fund’s reserve basket, known as Special Drawing Right (SDR).
The global dollar index fell to 95.466 from the previous close of 95.477. The offshore yuan was trading 0.15 percent weaker than the onshore spot at 6.68 per dollar. Offshore one-year non-deliverable forwards contracts (NDFs), considered the best available proxy for forward-looking market expectations of the yuan’s value, traded at 6.856, 2.65 percent softer than the midpoint. One-year NDFs are settled against the midpoint, not the spot rate.