SHANGHAI - China's yuan rose slightly against the dollar on Monday, buoyed by corporate dollar sales ahead of a key US-China dialogue, but gains were capped by a weaker midpoint, traders said.
Spot yuan stood at 6.2005 per dollar by midday, up 0.08 percent from Friday's close, although the People's Bank of China (PBOC) set its midpoint at 6.1658, 0.03 percent softer than Friday.
"Corporate sales rose ahead of the US-China Strategic and Economic Dialogue," said a trader from a European bank in
The selling of dollars appeared to be bets that China will let the yuan appreciate slightly ahead of major political events, traders said. The Chinese currency typically firms ahead of such meetings. China's critics have said market forces should play a greater role in determining the yuan exchange rate.
The latest upcoming annual US-China Strategic and Economic Dialogue will be held in Beijing from Wednesday to Friday. But the PBOC has not signalled a willingness to let the yuan appreciate during this round of the dialogue, with the weaker midpoint fixing partly helping to cool the market's enthusiasm to take long positions on the Chinese currency, traders said.
Traders said the yuan was likely to remain stable for now as the market was also awaiting fresh signs of China's economic performance.
"From what I have observed so far, the economy is still too weak to uphold a stronger yuan. As such, the yuan may move between 6.20/25 for now," said a trader from an Australian bank in Shanghai.
China will publish a slew of economic data this week and next, and the spotlight will be on June trade data which is expected to have a major impact on the yuan's movements.
The world's second-largest economy probably steadied in the second quarter with annual growth holding firm at 7.4 per cent, a Reuters poll showed, suggesting that a recovery is taking hold as a flurry of government stimulus measures kick in.
Exports in June are forecast to rise 10.6 per cent from a year earlier, faster than a 7 percent expansion in May and the best showing in five months. If the economy demonstrates healthy growth, the yuan could potentially rise to a new range of 6.15/20 per dollar in the third quarter, traders said.