China's yuan consolidates gains as investors unwind long dollar positions

HONG KONG: China's yuan consolidated against the dollar on Tuesday, following another stronger mid-point set by the central bank, as investors bet the Chinese currency would continue to rebound after its sharp fall in recent weeks.

The yuan traded at 6.1825 per dollar at midday, up 0.1 percent from Monday's close at 6.1888. It traded at a wide range between 6.1732 and 6.1892 in morning trade.

The People's Bank of China (PBOC) fixed the mid-point at 6.1426, up 0.04 percent from the previous day's 6.1452.

"Demand to buy the yuan in the morning remains strong as investors stop loss on their long dollar positions, and we believe the yuan will continue to rebound this week," a trader at a Chinese bank in Shanghai said.

"We thought it would hit 6.18 by the end of this week, which it actually reached within a day. Now we expect it to rise to 6.15-6.16 this week," the trader said.

The Chinese currency was also underpinned by hopes that the government may soon launch fresh stimulus following a slew of weak economic data which might lead the country's growth in the first quarter to the slowest level in five years.

Some economists forecast the slowdown could deepen further in the second quarter of the year, which would increase pressure on Beijing to provide the economy with a lift if it wants to meet its full-year growth target of around 7.5 percent.

The PBOC is widely believed to have engineered a sudden and sharp fall in the yuan in recent weeks to punish speculators who have seen the currency as a one-way appreciation bet, after it gained some 30 percent since 2005.

The yuan bounced from 13-month lows and recorded its biggest daily gain in nearly 30 months on Monday, after it saw a significant 1.2 percent weekly loss, its biggest-ever weekly drop, last week.