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SHANGHAI: The yuan was nearly flat versus the dollar in benchmark offshore non-deliverable forwards (NDFs)on Tuesday, retreating from a 5-week high after the central bank head flagged that China would allow the yuan to resume its rise.
The yuan's gains stalled in offshore markets after the prior day's bounce as China's foreign exchange chief tried to dampen talk of yuan appreciation sparked by earlier comments from Zhou Xiaochuan, Governor of the People's Bank of China.
But traders still expect Beijing to allow the Chinese currency to firm later this year with the recovering economy.
One-year dollar/yuan one-year NDFs were bid in a range of 6.6414 to 6.6550 late on Tuesday versus Monday's close of 6.6390, implying 12-month yuan appreciation of 2.58 to 2.94 per cent measured from the Chinese central bank's daily mid-point. That was almost unchanged from 2.83 per cent implied at its previous close.
Several dealers said the market does not expect yuan appreciation by end-2010 to exceed five per cent from the current level of around 6.83 against the dollar.
Spot yuan closed at 6.8263 per dollar on Tuesday, almost unchanged from Monday's close of 6.8264 after the Chinese central bank fixed the yuan's daily mid-point, or its reference rate, at 6.8265 per dollar, barely changed from Friday's 6.8266. Beijing allowed the Chinese currency to rise about 20 per cent against the dollar since its 2005 revaluation to mid-2008, but it has since re-pegged the yuan to the dollar in about a 100-pip range as it tried to protect its exporters from the crisis. -Reuters
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