Yuan closes down, first time in negative territory in 2013

Traders said that the People's Bank of China (PBOC) had intervened to keep the yuan low last week, disregarding a softening trend in the dollar in order to counter moves by some other Asian central banks to weaken their currencies, in particular the Japanese yen.

Both the yen and the dollar index rose Monday morning, but while the dollar continued to rise, the yen fell back in the afternoon, hitting a new 2-1/2 year low as traders returned to testing the currency's downside.

Central bank intervention in the Chinese forex market is difficult to detect and near-impossible to prove, but traders say unusually heavy trading volumes - like the $22 billion posted on Friday - often indicate the influence of the People's Bank of China (PBOC) in the market.

Trading volumes were moderate during the Monday morning session but shot up in afternoon trade, closing at over $20 billion.

The strong surge in transactions was unusual, traders said, because volumes are traditionally muted in the week leading to the Chinese Spring Festival, which will see mainland markets close for a week starting Feb. 11.

The yuan appreciated slightly over 1 percent against the dollar during 2012.