HONG KONG: China's yuan fell against the dollar on Tuesday on suspected intervention by the central bank to prevent its currency from appreciating too fast, a sign that any further gains by the yuan might be modest. Spot yuan traded at 6.1213 per dollar near midday, down 0.02 percent from the previous close. The People's Bank of China (PBOC) fixed the yuan's midpoint at 6.1571, or 0.03 percent weaker than Monday's 6.1554.
In the past week, the PBOC set a series of stronger midpoints. But it restrained gains in the spot market in order to narrow the gap between the two rates and prepare for more liberalisation, traders said.
"It is obvious the central bank does not want the yuan to rise too much since once there is demand to sell dollars, it enters the market to buy them," said a trader in Shanghai.
"The spot will go nowhere in the short term given such interventions and trading interest is also undermined," he said.
However, there's still optimism about the Chinese currency as the world's second-largest economy seems to have avoided a sharp slowdown and regained traction with a series of encouraging economic indicators.
China drew $79.77 billion in foreign direct investment in the first eight months of 2013, up 6.37 percent from a year earlier, the Commerce Ministry said on Tuesday.
Ministry spokesman Shen Danyang said he was confident the country could meet its target of 8 percent growth in overall trade this year.
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