Monday's fixing was much firmer than market expectations, traders said, leading to speculation that the central bank might be reinforcing signls that it wants the yuan stable during the two-day Belt and Road Forum, which ends on Monday.
Chinese authorities usually try to avoid any volatility during major political and economic events. In the spot market, the yuan opened at 6.8990 per dollar and was changing hands at 6.9000 at midday, only 7 pips weaker than the previous late session close and 0.21 percent weaker than the midpoint. The spot yuan was hovering around 6.90 per dollar level, with traders seeing no significant activity either side of the market by major state-owned banks.
"There was not much corporate dollar demand in morning trade. But as month-end is approaching, demand for the US currency might pick up soon," said a trader a foreign bank in Shanghai. The global dollar index fell to 99.17 from the previous close of 99.252.
The offshore yuan was trading 0.02 percent weaker than the onshore spot at 6.9011 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 7.0865, 2.84 percent weaker than the midpoint.
Copyright Reuters, 2017