SHANGHAI: China's yuan retreated on Tuesday from the record-high touched a day earlier, and traders expect only marginal appreciation in the weeks ahead.
Spot yuan changed hands at 6.2120 per dollar near midday, down 0.02 percent from Monday's close. The weakening came after the central bank set its daily midpoint 0.04 percent weaker at 6.2715.
By guiding the yuan to record highs in recent weeks, the People's Bank of China (PBOC) has clearly signaled it will permit the currency to appreciate this year, despite fears of a currency war touched off by the sharp drop in the Japanese yen since late last year.
Recent comments by the central bank indicating renewed concern about inflation this year should also increase official appetite for yuan appreciation.
But the PBOC has also demonstrated that appreciation will continue to be slower than China's trading partners want and that market forces would bring about if the PBOC refrained from intervening to buy up excess dollars.
The yuan has now gained 0.29 percent so far in 2013, putting it on pace for the 1 to 2 percent full-year appreciation that most analysts predicted at the start of the year.
Even at its record intraday high of 6.2095 on Monday, the yuan was only 0.04 percent stronger than Friday's close.
"People were feeling optimistic about Europe yesterday, so the euro gained, and the PBOC was responding to that," said a senior forex trader at an Asian bank in Shanghai of Monday's record high.
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