The yuan was little changed against the dollar in cautious trade on Thursday, with some traders squaring their long dollar positions ahead of Britain's referendum on whether to stay in or leave the European Union.
The yuan was little changed against the dollar in cautious trade on Thursday, with some traders squaring their long dollar positions ahead of Britain’s referendum on whether to stay in or leave the European Union.
The dollar index slid 0.3 percent on Wednesday and extended losses in early Asian trade on Thursday, when sterling hit a six-month high helped by reduced fears of Britain exiting the EU.
Spot yuan opened at 6.5747 per dollar and was changing hands at 6.5747 at midday, flat from the previous close when the market had already factored in some of the dollar’s broad weakness.
That allowed the yuan to shrug off the People’s Bank of China setting the midpoint rate at 6.5658 per dollar prior to market open, 0.42 percent firmer than the previous fix 6.5935.
Some traders said they squared their long-dollar positions in the past two days given that market sentiment had shifted for Britain to remain in the EU.
“You can see that there were three massive bouts of dollar selling yesterday,” said a trader at a Chinese commercial bank in Shanghai.
“That was traders squaring their positions.” On Wednesday, the yuan firmed 0.2 percent regardless of the PBOC’s 0.42 percent weakening of the official midpoint.
Traders also added that if Britain votes to stay in, it is expected that the pound will continue to rally, and the yuan then is likely to rebound above 6.55 to the dollar.
The offshore yuan was trading 0.16 percent softer than the onshore spot at 6.585 per dollar. The yuan market at a glance:
Item Current Previous Change PBOC midpoint 6.5658 6.5935 0.42% Spot yuan 6.5747 6.575 0.00% Divergence from 0.14% midpoint, Spot change YTD -1.23% Spot change since 2005 25.88% revaluation , Divergence of the dollar/yuan exchange rate. Negative number indicates that spot yuan is trading stronger than the midpoint.
The People’s Bank of China (PBOC) allows the exchange rate to rise or fall 2 percent from official midpoint rate it sets each morning.
Instrument Current Difference from onshore Offshore spot yuan 6.585 -0.16%, Offshore 6.7325 -2.48% non-deliverable forwards, Premium for offshore spot over onshore, Figure reflects difference from PBOC’s official midpoint, since non-deliverable forwards are settled against the midpoint. .