The yuan closed slightly firmer against the dollar on Tuesday but continued to trade below the mid-point fixed by the People's Bank of China (PBOC) as Chinese companies do not expect Beijing to let the currency appreciate sharply any time soon, traders said. The PBOC set a record-high mid-point for the third straight session on Tuesday, a move seen aimed at widening the range of the yuan/dollar exchange rate, traders said.
Spot yuan closed at 6.3072 versus the dollar, slightly stronger than Monday's close of 6.3140 but much weaker than Tuesday's PBOC midpoint of 6.2840. Monday's mid-point was 6.2858. Though the PBOC has set its mid-point at a record high for the past three sessions, the yuan has not approached its record trading high of 6.2884 hit on February 10.
The mid-point, used by the PBOC to flag the government's intentions for the yuan's value, is the base rate from which the dollar/yuan rate can rise or fall 0.5 percent in a day. The central bank appears to have changed tactics since the beginning of March in an effort to encourage the yuan/dollar exchange rate to move across a bigger range, traders said. In the past, the central bank had exercised restraint when adjusting the mid-point in order to maintain a gradual rate of change, but the rare trade deficit China recorded in February eased market pressure on the yuan to rise.
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