SHANGHAI: China's yuan rose against the dollar on Friday, guided by a stronger midpoint, while a top foreign exchange official said the country faces continued pressure from capital inflows.
Traders expect the inflows to continue nudging the Chinese currency higher.
Spot yuan was trading at 6.0473 per dollar at midday, up from 6.0517 at Thursday's close after the PBOC set its midpoint 0.12 percent stronger at 6.1035 from Thursday's 6.1107.
Traders said the People's Bank of China appeared to be reacting to a 0.9 percent weakening in the dollar index overnight.
However, the PBOC does not consistently respond to the greenback's global performance to decide the Chinese currency's value. Some traders speculated the central bank could be preparing to allow a new round of appreciation.
"The yuan is still under pressure to appreciate because of surplus dollars in the market," said a dealer at a Chinese commercial bank in Shanghai.
"But the currency's exchange rate is tightly controlled by the PBOC, so any round of appreciation will depend on the central bank's decision. We cannot judge whether it is engineering a new round of yuan appreciation on the basis of a single-day rise in the midpoint."
To support the market's view of expected long-term strength for the yuan, China's foreign exchange regulator said on Friday that the country faced pressures from net capital inflows.
Guan Tao, head of the department of international payments at the State Administration of Foreign Exchange (SAFE), also told a news conference that China can cope with possible capital outflows caused by US tapering.
Before Friday's rise, the yuan had generally moved in a narrow range around 6.05 since the start of this year. It has edged up only 0.05 percent so far this week and is up 0.11 percent so far this year.
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