The yuan ended up versus the dollar on Tuesday after the People's Bank of China set a record high mid-point ahead of a US congressional hearing on Chinese trade practices. A senior Republican lawmaker announced last week the hearing on trade practices he said were hurting American businesses and workers, but stopped short of promising action on Senate currency legislation to deal with the concerns.
"The government will inevitably be wary of this," said a trader at a Chinese commercial bank in Shanghai. "We expect the central bank could still let the fixing hover around a high level before the US makes a decision." US lawmakers critical of China's trade policies will use the hearing on Tuesday to press the White House to lay out a strategy to confront Beijing, even as Republicans resist a bill to punish the world's second largest economy for its currency practices. The hearing comes two weeks after the Senate passed legislation to push China to let the yuan rise in value.
Spot yuan closed at 6.3604 versus the dollar, up from Monday's close of 6.3754. It has risen 3.61 percent so far this year and 7.32 percent since it was depegged from the dollar in June 2010. Before trading began, the PBOC set the mid-point of the day at 6.3425, stronger than Monday's 6.3549. The central bank uses the fixing to signal the government's intentions for the yuan. China had let the yuan rise as much as 4 percent versus the dollar from the beginning of this year to Tuesday October 11 - just ahead of the US Senate's approval of its yuan bill.
Offshore, one-year dollar/yuan non-deliverable forwards (NDFs) were bid at 6.3865 in late trade compared with 6.4000 at the close on Monday. They implied yuan depreciation of 0.69 percent in 12 months from Tuesday's PBOC mid-point, compared with depreciation of 0.90 percent they implied on Monday.