The yuan closed down against the dollar on Tuesday, even though the People's Bank of China set the yuan's mid-point at a record high, with dealers saying the currency had already risen sharply in the last two sessions. The yuan had been overly active in recent days and gains were likely to be tempered for a while.
Spot yuan finished at 6.6088 versus the dollar, down from Friday's close of 6.5897 - the last trading day before three-day New Year's Day holiday. The PBOC fixed the day's mid-point, from which the yuan can rise or fall 0.5 percent in a given day, at a record high of 6.6215, but up only 12 pips from Friday's 6.6227. Dealers said a climb of only several pips in the Chinese central bank's mid-point reflected its intention to let the yuan move up slowly.
Benchmark one-year non-deliverable dollar/yuan forwards were bid at 6.4360, up slightly from Friday's close of 6.4280. Their implied yuan appreciation in a year's time fell slightly to 2.88 percent from 3.01 percent. China-based traders expect the yuan to appreciate about 2 percent in the first quarter of 2011, partly propelled by Chinese President Hu Jintao's visit to the United States in mid-January.
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