Yuan recovers on stronger central bank midpoint

SHANGHAI: The yuan strengthened on Tuesday in light trade and mild volatility, as traders said customers were settling their currency positions ahead of the Spring Festival, during which mainland markets will be closed for a week.

The central bank set a slightly stronger midpoint, despite the fact that the dollar index rose in overnight trade, surprising traders.

"The market expected the central bank to keep weakening the midpoint, so when it strengthened it, that triggered a lot of stop-loss orders," said a trader at a joint stock bank in Shanghai.

He added that the market expects to see more volatility and a wider range in trading quotes in coming days as companies make quick moves to short up their forex positions before markets shut for all of next week.

Transaction volumes were weak in morning trade at slightly over $5 billion, but they often increase significantly in the afternoon.