BEIJING/SHANGHAI: The yuan rose against the dollar in morning trade on Monday after the central bank set a record high mid-point, indicating its intention to nudge the currency up despite a big sell-off in Asian currencies last week.
But yuan gains were still below its all-time peak due to the dollar's strength boosted by risk aversion demand and concerns over turmoil in global markets.
"Despite a record-high mid-point set by the central bank, the rise in the yuan is still capped below the fixing, indicating that trading is from genuine FX demand and not from speculation," said a trader at a state bank in Beijing.
Spot yuan was at 6.3845 versus the dollar, stronger than Friday's close of 6.3889. It has risen 3.21 percent so far this year and 6.91 percent since its depegging in June 2010.
Before trading began, the PBOC fixed the day's mid-point at a record high 6.3735 , compared with Friday's 6.3840. The central bank uses the fixing to express the government's intention for the yuan's daily movements.
Most investors maintain the long-held view that the yuan will continue to gradually appreciate for the rest of the year.
"I think the yuan will remain on the ascending path and such a trend will not be changed at least for the rest of this year," said another trader at a state bank in Shanghai.
Offshore, one-year dollar/yuan non-deliverable forwards (NDFs) were bid at 6.3940 in morning trade, compared with the previous close of 6.4090.
They implied expectations that the yuan would depreciate 0.32 percent in a year's time compared with expectations of 0.39 percent depreciation previously.
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