Yuan firms as exporters convert dollars before week-long holiday

Business Recorder reported that the Chinese yuan rose on Tuesday against the greenback, as exporters converted more of their dollar holdings into yuan before the National Day break. The spot rate was last at 6.7057 per dollar in early trade, 61 pips stronger than the earlier late-session close. The gain came even as the dollar hovered close to a two-month peak.

The People's Bank of China set the midpoint at 6.7411 per dollar, which sat 234 pips below a Reuters estimate, and the gap is the narrowest in two months. The week-long holiday begins on Thursday, and trading onshore restarts on October 8. The yuan has risen 0.2 per cent this month and 4.3 per cent so far this year.

Zhang Ming, deputy director at the Institute of World Economics and Politics under the Chinese Academy of Social Sciences, told Securities Times that the yuan could fluctuate in a 6.5 to 6.9 band against the dollar through year-end. He tied that outlook mainly to ongoing weakness in the dollar index, but said room for further gains is limited given possible Federal Reserve rate hikes and higher long-term US bond yields. He also noted that the central bank has tools to respond if appreciation becomes too rapid.