China's yuan briefly touched a record high on Friday after the central bank set the strongest midpoint in advance of a US visit by China's vice president, but the currency closed weaker following an afternoon retreat sparked by weak trade data.
Spot yuan touched a record intra-day high of 6.2884 per dollar on Friday morning - surpassing the previous high of 6.2919 on January 4 - after the People's Bank of China (PBOC) set a midpoint of 6.2937, its strongest ever. It was the second straight midpoint below 6.30, a barrier it had never breached before Thursday.
But the surge was short-lived. The yuan closed at 6.2986, 34 pips weaker than Thursday's close. The fall occurred after data showed that China's exports suffered a 0.5 percent year-on-year decline in January, while imports sank by 15.3 percent. "China has to strike a pose," said a dealer at a foreign bank in Shanghai, referring to the strong midpoint in advance of vice president Xi Jinping's visit to the United States on Tuesday.
"But after next week, there will definitely be some correction," he said. Traders expect the yuan to stabilise between 6.28 and 6.30 over the next month. President Hu Jintao's closely-watched state visit to the United States in January 2011 also appeared to influence the central bank's exchange rate policy.
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