SHANGHAI: China's yuan closed at a record high of 6.1192 against the dollar on Wednesday, its highest since the foreign currency market was created in 1994, stirring speculation as to whether the central bank is ready to allow further appreciation despite weak exports.
The currency has gained percent 1.8 percent so far this year, bucking a weak trend in emerging market currencies, but has flattened out since setting repeated record highs in April and May.
The central bank set its official midpoint at 6.1726 on Wednesday morning, only 0.04 percent stronger than Tuesday's 6.1753, but the spot yuan took advantage of the fixing to move into new territory for the first time since May.
Traders said Wednesday's midpoint move appeared to be fixed higher tracking a 0.3 percent fall in the dollar index overnight, but were unclear about why the spot market turned suddenly bullish.
Market participants widely believed that the People's Bank of China has been moving to stabilise the currency in the wake of disappointing export figures and signs of capital outflows, with some economists even predicting a round of mild depreciation in the offing.
Some suggested the central bank itself was responsible for the spot quote, because strengthening the yuan is part of its wider reform programme.
"Many in the market believe that unusual quotes often come from the PBOC's trading room directly, although no one can be certain," said a trader at a European bank in Shanghai.
"The market is now divided as to whether the PBOC is testing waters for a stronger yuan ... The PBOC's official fixing did not give any sign of another round of yuan appreciation."
China's exports, factory output and retail sales may have all edged up in July, according to a Reuters poll, showing initial signs of stabilisation in the economy as the government takes targeted steps to head off a sharper slowdown.
Trade data will be released on Thursday.
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