SHANGHAI: China's yuan edged up against the dollar on Tuesday after the central bank set a slightly firmer midpoint, signalling a likely end to a week-long weakening trend for the Chinese currency.
Before Tuesday, the People's Bank of China had set the official base rate, weaker for the sixth straight session, guiding the Chinese currency away from the slew of all-time highs touched in mid-October. The dollar/yuan exchange rate is permitted to rise or fall as much as 1 percent from the midpoint each day.
"The PBOC's midpoint today sent a signal of the end of the consolidation period," said a trader at a Chinese state-owned bank in Shanghai.
"But the slightly stronger midpoint does not indicate another upward trend for the yuan, rather a coming period of stability."
Spot yuan traded at 6.0964 per dollar near midday, up 0.05 percent from Monday's close of 6.0992 after the PBOC fixed its midpoint at 6.1447, slightly up from Monday's 6.1482.
Traders expect the yuan to trade narrowly -- within about 100 pips around 6.1 per dollar -- in the coming weeks, barring major market-moving news.
The yuan stabilised on Monday after dropping 0.26 percent last week, its biggest weekly fall since a 0.4 percent decline for the week ended June 1, 2012.
The consolidation came after the central bank guided the yuan to a slew of record highs around mid-October, reflecting a weakening dollar in global markets at the time, as well as heavy dollar supply in the domestic market, traders said.
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