SHANGHAI: China's yuan slipped a touch against the dollar early on Wednesday, guided by the central bank's midpoint, with the majority of deals made by bank clients settling their foreign exchange positions before the end of the year, traders said.
The People's Bank of China (PBOC) marginally weakened its midpoint to 6.2943 from Tuesday's 6.2931, which traders said reflected an overnight rebound in the dollar index .
The exchange rate is allowed to diverge by only 1 percent in either direction from the central bank's daily midpoint.
The yuan was trading at 6.2344 per dollar, down five pips from Tuesday's close of 6.2339, as few market participants were willing to take aggressive long or short positions before the end of the year, they said.
Wednesday morning's trading volume rose slightly to $4.76 billion from a $4.60 billion on Tuesday morning.
The Chinese currency is up 0.96 percent versus the dollar so far this year. Many traders say they do not expect big movements in final few trading days of the year and forecast the yuan to appreciate around 1 percent for all 2012.
"The yuan is likely to stay around the current value for the rest of this year as few market players want to bet on much higher or lower rates," said a dealer at a Chinese commercial bank in Shanghai.
"The only unknown factor is the PBOC's attitude, although the central bank appears to have no intention to push the yuan sharply up or down for now."
China has long been under pressure from the United States to let the yuan appreciate to balance bilateral trade. In the past few years the central bank has typically let the currency rise slightly in the final days of December to increase the percentage by which it strengthened in a year.
However, this year the government has repeatedly said that the yuan - which is up around 1 percent since January - has reached its fair value, and that it is no longer necessary for the central bank to intervene in trading on a large scale to guide the currency's value.
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