SHANGHAI: China's yuan strengthened against the dollar on Monday as the central bank appeared to wind down intervention to stem its rise, traders said.
The yuan changed hands at 6.2325 per dollar in early afternoon, 0.14 percent firmer than Friday's close of 6.2415.
The central bank set its midpoint at 6.2892 per dollar, slightly firmer than Friday's fix after the dollar index fell in overnight trade.
Trading volumes were moderate at $3.8 billion by early afternoon, signalling a likely slowdown from Friday, which clocked in an unusually strong $17 billion yuan for the day.
Volumes recovered last week when traders said major Chinese banks began buying up dollars on behalf of the central bank, restoring liquidity to the market and pushing down the yuan spot rate.
"Last week, the central bank intervened frequently, but if the market can recover on its own, regulators will stop managing the situation," said a trader at a major Chinese bank in Shanghai.
The spot market stalled for much of November and December and liquidity slumped as corporates did not want to buy the dollar at the levels given by the central bank's daily trading range as they expected the yuan to strengthen further.
Traders said they expected the yuan to hold steady within its current range next year, pointing to a statement from the government's economic work conference on Sunday committing to a stable currency.
"We can throw out expectations of much appreciation or depreciation at this point," said a trader at a joint-stock bank in Shanghai.
According to data from the Bank for International Settlements, the yuan rose in real trade-weighted terms against a global basket of currencies in November, to 109.6 up from 107.9.
Center>Copyright Reuters, 2012
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