China yuan finds support in longer term forwards

[HenryTo]

Are the investors/speculators starting to get disappointed with the latest Yuan revaluation? It appears so...
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China yuan finds support in longer term forwards

SINGAPORE, July 29 (Reuters) - The Chinese yuan was supported in the longer term forwards on Friday by investors buying the currency to bet that it will eventually appreciate, traders said.

In the offshore non-deliverable forwards (NDF), a market used to speculate on the controlled currency, the yuan remained under pressure in the near maturities.

One-month NDFs quoted the yuan at 8.09/8.10 yuan per dollar, just 0.2 percent higher than the spot rate of 8.1071. One month NDFs were quoted at 8.04 last Friday.

The yuan selling has persisted most of this week, triggered by investors' disappointment with the currency's tight ranges following last week's revaluation and depegging from the dollar.

"U.S. names are still buying dollar/China. The chances of further gains in the yuan near-term seem very thin," one Hong Kong-based trader said. "But the longer end is supported by spread-selling."

Investors were selling yuan in the near maturities and buying it back from the 3-month to one-year horizon, he added.

One-year NDFs showed the yuan rising 4.5 percent to 7.755 yuan per dollar, a slight rise from Thursday's 7.76.

Three-month NDFs quoted the yuan at 8.045 per dollar, up from 8.055 on Thursday but still far less bullish than the 7.97 level markets had priced in the day after the revaluation.

China severed a decade-old yuan peg to the U.S. dollar last Thursday, and said it would manage the yuan against a basket of currencies.

It revalued the yuan by 2.1 percent to 8.11 per dollar, and said markets could trade the dollar-yuan pair each day in a 0.3 percent band around the previous day's close.