SHANGHAI: China's central bank guided the yuan to a record high against the dollar on Wednesday for the fourth day, leaving the market speculating about whether a correction in the Chinese currency is imminent, traders said.
The People's Bank of China (PBOC) set its official midpoint at an all-time high of 6.2342 against the dollar on Wednesday, up from 6.2408 on Tuesday.
Spot yuan closed at an all-time high of 6.1723 on Wednesday, toppling the former record of 6.1798 set in intraday trading on Tuesday and also up from Tuesday's close of 6.1831.
"The only thing you can do of late is to trade in line with the midpoint, even though fears of a big correction in yuan/dollar looms large," said a European bank trader in Shanghai.
"The latest PBOC action is contrary to its repeated pledge to keep the yuan stable. Amid an apparent lack of transparency, lots of speculative talk is circulating."
Some traders believe that the strong midpoint settings are intended to limit the risk of capital outflows after a recent downgrade of China's sovereign debt by foreign ratings agencies over its management of local debt.
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