SHANGHAI: The yuan pulled back from near seven-week highs on Thursday as the dollar resumed its climb.
The People's Bank of China (PBOC) set the official midpoint -- from which the exchange rate is allowed to diverge by 1 percent in either direction -- at 6.2785, down 0.06 percent from Wednesday's midpoint, as the dollar index shot upward in overnight trade after sinking for most of the week.
Intraday trade remained range-bound at the strong side of the permitted range, and volumes increased, closing at $14 billion, up from $12 billion on Wednesday.
The yuan on Wednesday firmed to levels not seen since mid-January.
The dollar firmed on strong US job data and on expectations that the European Central Bank is planning to cut rates and otherwise ease policy as growth and inflation in the euro zone remains disappointing.
The apparent stabilisation of the Japanese yen after a three-month bout of depreciation has given the PBOC more leeway to permit yuan appreciation. But recent comments from the head of China's sovereign wealth fund accusing Japan of using its neighbors as a "garbage bin" suggest China is still concerned that Japan may continue to ease policy.
On the other hand, data from regulators hinting at renewed inflows of foreign capital in January supports confidence in appreciation. Chinese banks, including the central bank, purchased a record net 683.7 billion yuan ($109.90 billion) of foreign exchange in January.
A comparison of monthly import and export data shows that exporters are increasingly converting their forex receipts that into yuan, while importers are decreasing the proportion of their import payments that they are converting into foreign currency.
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