The yuan ended at a record high against the dollar on Monday after the People's Bank of China lifted the mid-point to a new peak, signalling its intentions to use the yuan as another inflation-fighting tool. The central bank surprised markets last Friday by announcing an increase in banks' reserve requirement ratios to tighten the screws on liquidity and put a lid on asset bubbles and inflation.
The 50 basis point rise in RRR after markets closed on Friday was the third such increase this year and the sixth since November. The dollar index was at 75.6, after hitting a 15-month low on Friday. The yuan finished at 6.5611 versus the dollar, one pip off the intraday high and up from Friday's close of 6.5691. The currency has now risen 4 percent since it was depegged in June 2010. Benchmark one-year dollar/yuan non-deliverable forwards (NDF) were bid at 6.4350 on Friday, little changed from 6.4410 at Friday's close. Their implied yuan appreciation in a year's time rose to 2 percent from Friday's 1.9 percent.
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