The yuan closed lower from record highs against the dollar on Tuesday, after the People's Bank of China set the mid-point slightly weaker. Chinese leaders are attending the annual parliament session in Beijing, and traders say the central bank may wish to keep the Chinese currency relatively stable during the crucial political session.
Spot yuan fell back slightly to close at 6.5684 versus the dollar, down from Monday's record intraday high of 6.5628. The currency has risen 3.92 percent since it was depegged in June 2010. This year's meeting is particularly important as China maps out plans for its economic development and reforms over the next five years from 2011 to 2015, with the government expected to elaborate on a shift from growth that is reliant on exports to one that is solidly based on domestic consumption.
Before trading began, the PBOC fixed the yuan's mid-point at 6.5687 on the dollar, weaker than Monday's record high fixing of 6.5651. The dollar/yuan exchange rate can trade up or down a maximum 0.5 percent in a given day from the mid-point, which is used by the PBOC to express the government's intentions for the currency.
The yuan also faces international pressure. The US Treasury Under-Secretary Lael Brainard said recently that the Chinese currency remains substantially undervalued. Benchmark one-year dollar/yuan non-deliverable forwards (NDF) were bid at 6.4130, slightly up from 6.4040 at Monday's close. Their implied yuan appreciation in a year's time fell to 2.42 percent from 2.57 percent.
Comments
Comments are closed for this article.