SHANGHAI: The central bank guided the yuan lower on Tuesday after the dollar rose in global markets, but trading remained range-bound in the run-up to a holiday that will see foreign exchange transactions halted for a week as markets shut.
However, the spot market remained bullish, with the midpoint guidance rate holding back the spot rate from setting new record highs against the dollar as foreign inflows continue to apply upward pressure. "Today's market price is still stable. There hasn't been any change," said a dealer at a city commercial bank in Shanghai.
"Once we get past the Lunar New Year, trade still won't be too energetic. I predict this trend of gradual rises will continue, with the yuan likely to break through 6 per dollar at some point this year."
The People's Bank of China (PBOC) set the official midpoint at 6.1053 before market open on Tuesday, softening by 0.05 percent, and spot yuan followed to trade at 6.0505 at midday, down 0.04 percent from Monday's close.
The spot rate is 0.9 percent stronger than the midpoint, near its 1 percent daily limit on either side of the fixing, and the offshore market in Hong Kong -- which is not restrained by the PBOC's midpoint setting -- was even stronger at 6.0346 per dollar.
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