Yuan ends up, dealers note ample dollar supplies

The yuan closed higher against the dollar on Thursday, buoyed by an influx of dollars from China's huge trade surplus and amid signs the central bank may let the currency rise at a slightly faster pace in the near term.
The yuan ended at its intraday high of 7.6151 to the dollar, up from Wednesday's finish of 7.6188, after moving within a narrow range. The intraday low was 7.6178.
"Dollar selling has been spurring the pace of the yuan's rise over the past several weeks," said a Shanghai dealer at a US bank. Dealers said the pressure from dollar supplies indicated China's trade surplus was still growing at a fast pace in June. The country posted a surplus of $22.45 billion for May, up 33 percent from April and up 73 percent from May of last year.
China is also facing increasing pressure on its currency from US politicians, with several senators introducing bills aimed at pushing for a faster rise in the yuan.
Before trading started, the central bank fixed the yuan's daily mid-point at 7.6178 to the dollar, slightly weaker than Wednesday's 7.6165, which was the highest mid-point - the benchmark for each day's yuan movements - since Beijing revalued the currency and depegged it from the dollar in 2005.
The central bank has set a series of record high mid-points over the past three weeks, guiding the yuan to a gain of 0.63 percent during the period, for an annual appreciation rate of more than 10 percent.
But the yuan has appreciated only 2.50 since the start of this year, in line with dealers' forecast that it would rise 5 percent for all of 2007, compared with 3.4 percent in 2006.
The currency rose at an annual rate of 7.2 percent in January but was nearly flat from February until late April. It resumed climbing again in late April, ahead of key trade talks between the United States and China in May.
The yuan hit a post-revaluation trading peak of 7.6135 to the dollar on Wednesday, for a total gain of 6.52 percent since its 2.1 percent revaluation on July 21, 2005.
"During this period, the yuan could move in a patten of three steps forward, one step back, quicker than the previous pattern of two steps forward, one step back," he said.
One-year offshore non-deliverable forwards (NDFs) quoted the yuan at 7.2690/7.2730, indicating a gain of 4.74 to 4.80 percent in one year's time from Thursday's mid-point, down marginally from 4.75 to 4.81 percent on Wednesday.