The yuan gained slightly against the dollar on Wednesday, but showed no sign of breaking out of the narrow range in which it has traded since late March. With uncertainty lingering about the trend in the domestic economy as well as the state of the eurozone debt crisis and the US economic recovery, trading volumes have been low, dealers said, and the yuan is likely to stay in the 6.30 to 6.32 range in the near term.
"People don't really have a clear view," said a non-deliverable forwards trader at a European bank in Hong Kong. Spot yuan closed at 6.3088, 34 pips stronger than Tuesday's close. Dealers noted that in the last two days, the central bank has departed from its usual practice of setting a weaker midpoint in response to an overnight rise in the dollar index, or vice versa.
Instead, the midpoint has followed the dollar index. The midpoint fixing is the base rate that the central bank uses to flag the government's intentions for the yuan's value, and from which the yuan is allowed rise or fall 0.5 percent in the course of a day. Though two days is too short a period to confirm a trend, dealers speculated that the central bank may be experimenting with using a wider basket of currencies to determine the midpoint's value.
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