China's yuan closed lower against the dollar on Wednesday after hitting a fresh post-revaluation high, as dealers saw room for a further correction in the currency after its gains of recent weeks.
The yuan closed at 7.6188 to the dollar, down from Tuesday's finish at 7.6159 and off its intraday peak of 7.6135 - the highest since the currency was revalued and depegged from the dollar in July 2005.
The central bank set the tone for the yuan's initial gains by fixing the currency's mid-point at 7.6165 before trading started, up from Tuesday's 7.6184 and the daily reference rate's highest level since the revaluation.
But technically driven selling set in late in the session as the market worried about pressure for a further correction in the yuan after it hit repeated post-revaluation highs over the past two weeks.
"The yuan will continue its (medium-term) uptrend, guided by a higher mid-point, although there are uncertainties about how the yuan will be affected by policy news or trade in other currencies," said a dealer at a major US Bank.
The yuan's intraday high of 7.6135 left it with a gain of 2.5 percent since the start of this year, or an annual rate of about 5 percent, compared with a rise of 3.4 percent in 2006.
China took a major step on Wednesday towards establishing a fund that will invest $200 billion of its $1.2 trillion in foreign exchange reserves in assets around the globe.
Lawmakers began reviewing a proposal to authorise the Ministry of Finance to issue 1.55 trillion yuan ($203.5 billion) in special treasury bonds to buy foreign exchange that would fund the start-up of the agency, Xinhua news agency reported.
One-year offshore non-deliverable forwards (NDFs) quoted the yuan at 7.2670/7.2710, indicating a gain of 4.75 to 4.81 percent in one year's time from Wednesday's mid-point, down from 4.91 to 4.97 percent on Tuesday.
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