Yuan hits record high

The yuan closed just two pips shy of its intraday record trading peak to the dollar on Wednesday as the People's Bank of China fixed its daily mid-point at an all-time high after an interest rate hike, in the latest sign that the government is going all out to fight high inflation.
As yuan appreciation prospects in the medium term appear to have become clearer, volatilities implied in both onshore and offshore yuan/dollar options dropped on Wednesday. Spot yuan closed at 6.5440 versus the dollar, up from last Friday's close of 6.5479. Markets were closed on Monday and Tuesday for the Tomb Sweeping Day holiday.
It hit a record high of 6.5438 late in the session, having risen 4.31 percent since it was depegged in June 2010, and 0.70 percent so far this year. Before trading began, the PBOC fixed the yuan's mid-point at a record high of 6.5496, stronger than Friday's historical high of 6.5527.
One-year yuan/dollar onshore options implied volatilities of 3.11 percent bid in 12 months late on Wednesday, down from 3.2 percent at the previous close. Implied volatilities in one-year offshore options were quoted a 3.55 percent bid from 3.85 percent.
Offshore dollar/yuan forwards implied more yuan appreciation on Wednesday, taking cues from the onshore spot yuan market, traders said. One-year non-deliverable forwards were bid at 6.4000 late on Wednesday, down from 6.4080 at the previous close. Their implied yuan rise in a year's time rose to 2.33 percent from 2.20 percent implied at their previous close.