The yuan ended up slightly versus the dollar on Tuesday after the People's Bank of China fixed a higher mid-point, snapping three day's of weakness, with the Chinese currency expected to rise further as inflation accelerated to a 34-month high.
China's inflation in May hit a 34-month high of 5.5 percent, slightly above expectations, supporting the case for tighter monetary policy even as there are signs that economic growth is slowing down. Dealers said China still faces strong pressure from domestic inflation, although the consumer price index (CPI) was close to market expectations.
Spot yuan closed at 6.4 803 versus the dollar, up from 6.4830 at the close on Monday. It hit an all-time record high of 6.4755 last Wednesday. The Chinese currency has now appreciated 5.33 percent since it was depegged from the dollar in June 2010, and 1.66 percent since the start of this year. Offshore, one-year dollar/yuan non-deliverable forwards were bid at 6.3760 in late trade, down from Monday's close of 6.3860. Their implied yuan appreciation in a year's time rose to 1.67 percent from 1.51 percent.
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