Yuan slips, but still set for second weekly gain
SHANGHAI, Jan 21 (Reuters) - China's yuan slipped against the dollar on Friday as market participants locked in profits and refrained from testing highs in the Chinese currency. But for the week, the local unit looked set for a second straight weekly gain, despite a flurry of cuts in key interest rates to help support the cooling economy. Prior to the market opening, the People's Bank of China (PBOC) set the midpoint rate at 6.3492 per dollar, 7 pips weaker than the previous fix 6.3485. In the spot market, the onshore yuan opened at 6.3460 per dollar and was changing hands at 6.3427 at midday, 12 pips weaker than the previous late session close. Values have been buoyed by sustained corporate demand for the Chinese currency ahead of the long Lunar New Year holiday starting Jan. 31. But traders said some investors appeared to be reluctant to push the yuan higher as the 6.34 per dollar level provided strong resistance. The yuan is likely to consolidate on the firmer side of 6.34 per dollar before the holiday, said a trader at a foreign bank. Separately, the country's FX regulator told a news conference on Friday that China must prevent and defuse risks of external shocks this year while strengthening macro-prudential management and guiding expectations, at a time when some countries are preparing to tighten monetary policy. China can better "cope with external changes, and this round of tightening by the Federal Reserve may have less spillover effect than the previous round," Wang Chunying, spokesperson of the State Administration of Foreign Exchange (SAFE). By midday, the global dollar index fell to 95.687 from the previous close of 95.735, while the offshore yuan was trading at 6.3466 per dollar. The yuan market at 0413 GMT: ONSHORE SPOT: Item Current Previous Change PBOC midpoint 6.3492 6.3485 -0.01% Spot yuan 6.3427 6.3415 -0.02% Divergence from -0.10% midpoint* Spot change YTD 0.19% Spot change since 2005 30.49% revaluation Key indexes: Item Current Previous Change Thomson 102.51 102.44 0.1 Reuters/HKEX CNH index Dollar index 95.687 95.735 -0.1 *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. OFFSHORE CNH MARKET Instrument Current Difference from onshore Offshore spot yuan 6.3466 -0.06% * Offshore 6.4667 -1.82% 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. . (Reporting by Winni Zhou and Andrew Galbraith; Editing by Kim Coghill)
