BEIJING/SHANGHAI: The yuan closed slightly lower against the dollar on Thursday even after the People's Bank of China set an all-time high mid-point fixing, but traders expect yuan appreciation to still be on the cards despite some short-term correction.
The central bank probably intends to guide the yuan gently higher, dealers said, and such a trend may continue in the coming months, partly as a way to help check stubbornly high inflation, seen hovering near a three-year high in July.
"The basic tone will not change, that the yuan will keep rising and the central bank may widen the trading band in the second half to make the currency more flexible," said a trader in a state bank in Beijing.
Spot yuan closed at 6.4390, weaker than Wednesday's close of 6.4341. It has now appreciated 6.01 per cent since it was depegged from the dollar in June 2010 and 2.34 per cent so far this year.
Before trade began the PBOC fixed the yuan's mid-point at a record high of 6.4386 against the dollar, stronger than Wednesday's 6.4441.
Some dealers said recent uncertainties hanging over major global currencies, such as the dollar, euro and yen, had shifted investors' attention from the yuan, providing a good environment for the Chinese currency to rise in a steady way.
"Right now, it should be a good chance of guiding the yuan up further, as global investors are focusing on debt woes either in the US or the euro zone, which could ease some hot money inflow pressure," said a trader in a joint stock bank in Shanghai.
Offshore, benchmark one-year dollar/yuan non-deliverable forwards (NDFs) were bid at 6.3650 in late trade, firmer than 6.3670 at the previous day's close.
Their implied yuan appreciation in a year's time fell to 1.16 per cent from 1.21 per cent.
