HONG KONG/SHANGHAI: China's currency consolidated recent gains on Wednesday after the People's Bank of China fixed the daily yuan midpoint slightly weaker in line with a stronger dollar.
The yuan edged lower against the dollar after rising for three consecutive days as investors braced for more volatility in the currency market after recent data showed the economy may have stabilised after a patch of weakness in the first quarter.
"The central bank has recently fine-tuned the yuan's value in line with China's foreign trade data in May," said a senior trader at a European Bank in Shanghai.
The central bank set the yuan midpoint at 6.1506 per dollar on Wednesday, breaking a three-day streak of strong fixings. It was in line with banks' models and with a stronger greenback.
Consequently, the yuan eased to 6.2286 per dollar compared with 6.2250 at Tuesday's close.
China's exports in May rose 7 percent from a year earlier, while imports fell 1.6 percent, widening the trade surplus sharply to $35.9 billion from April's $18.5 billion, the General Administration of Customs said over the weekend.
"Even if the yuan temporarily stops depreciation, as was seen earlier this year, it does not necessarily mean a return to an appreciation trend," the trader said.
Some market participants such as HSBC believe the recovery in trade and recent action by the People's Bank of China to set the midpoint stronger, may push the currency up to 6.14 per dollar by the end of 2014.
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