The yuan closed higher against the dollar on Thursday after the People's Bank of China set another record high daily fixing amid renewed pressure from US lawmakers for Beijing to unshackle its currency. The central bank appeared to send a strong signal to the market that the government was more willing to let the yuan appreciate by fixing its daily mid-point at a record high of 6.5849 to the dollar, up one pip from Wednesday's 6.5850.
China's recovering economy is also giving the authorities more confidence to carry out more currency reform, traders said. A bipartisan group of US lawmakers planned to begin a new drive on Thursday for China currency legislation that was approved last year by the House of Representative but failed in the Senate. Spot yuan closed at 6.5865 against the dollar, up from 6.5938 at Wednesday's close. It has now risen 3.64 percent since its depegging from the dollar in June 2010.
The currency is expected to rise steadily in the near term and is seen appreciating 5 to 6 percent in 2011 based on China's economic strength and its increasing willingness to move to a more flexible exchange rate regime, traders said. Offshore, benchmark one-year dollar/yuan non-deliverable forwards were bid at 6.4340, up from 6.4250 at Wednesday's close. Their implied yuan appreciation in a year's time fell to 2.35 percent from 2.49 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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