China's yuan ended up against the dollar on Tuesday but moved below the central bank's record high daily fixing as trading thinned ahead of the week-long Lunar New Year holiday that begins on Wednesday, traders said. Despite sluggish trade, the People's Bank of China sent a strong signal to the market that the government was determined to let the yuan appreciate in the near term by fixing its daily mid-point at a record high of 6.5860 to the dollar.
Spot yuan ended at 6.5938 against the dollar compared with 6.6030 at Monday's close. It has now risen 3.53 percent against the dollar since its depegging last June. Before trading began on Monday, the People's Bank of China fixed its mid-point at 6.5860, up from Monday's 6.5891. Offshore, benchmark one-year dollar/yuan non-deliverable forwards were bid at 6.4580 late on Tuesday, down from 6.4630 at Monday's close. Their implied yuan appreciation in a year's time rose to 1.99 percent from 1.91 percent. Dollar/yuan offshore forwards have generally staged a lacklustre performance so far this year, partly because signs of a US economic recovery pushed hedge funds to reallocate their assets, traders said.
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