SHANGHAI: The yuan firmed slightly against the dollar on Thursday, advancing as far as the official daily trading range allowed, with the central bank again restraining pressures for the yuan to strengthen more.
Standing at 6.2289 yuan to the dollar, the Chinese currency had strengthened from Wednesday's close of 6.2302.
The People Bank of China (PBOC) made sure the yuan could not go any further by setting a weaker daily trading range than Wednesday, by fixing the mid-point at 6.2918 yuan per dollar, 10 pips weaker than Wednesday's 6.2908.
"The authorities apparently don't want see the yuan rising too much," said a trader at a Chinese commercial bank in Shanghai.
"The PBOC appears to believe that the yuan has roughly reached its fair value, and it appears that it doesn't want to buy too many dollars to support the US currency."
Traders suspected covert intervention on Wednesay, when dollar buying by major state-owned banks dampened the yuan's rise.
Intraday volume data from the central bank showed that the bulk of the volume occurred before the exchange rate hit the edge of the trading band but flattened out once it did.
The yuan has hit repeated record highs versus the greenback since late September due to a glut of dollars in the market.
According to analysts and traders there are several factors behind the dollar overhang, including a recent pick up in China's exports.
The yuan is only up 1 percent since the start of the year, but is 2.7 percent off its July lows. Many traders believe the Chinese currency could appreciate further in the near term and may close around 6.2 by the end of this year, but they see the rally ending next year as the dollar overhang subsides.
Comments
Comments are closed for this article.