Yuan ends up

The yuan closed higher against the dollar on Thursday amid expectations that the central bank would soon permit a fresh leg up, but traders dismissed a media report that China was threatening to dump the dollar due to trade tensions.
The yuan finished at 7.5646 to the dollar, up sharply from 7.5748 at Wednesday's close, after the central bank set its daily mid-point at 7.5648 before trade started, much stronger than Wednesday's 7.5759. The central bank has kept the dollar/yuan rate largely moving sideways for the past month, effectively deterring speculation about faster appreciation.
Traders said the central bank might now be prepared to allow a fresh move higher in the yuan, perhaps in response to July inflation data next Monday. Inflation is widely rumoured to be 5.6 percent, up sharply from June's 4.4 percent.
"The central bank has kept the yuan mostly lower than the 7.5600 level over the past month because it wants to curb speculation," said a Shanghai dealer at a European bank.
"This pause has left room for the yuan to rise slightly next week after the government announces July inflation." He and others said the yuan could rise above 7.5500 next week, passing a post-revaluation high of 7.5543 hit on July 25.
But several dealers said they were not changing their expectations for the yuan to continue appreciating only gradually against the dollar and rise around 5 percent this year, against 3.4 percent appreciation in 2006.
Some traders think the central bank could accelerate the annual pace of appreciation slightly late this year - perhaps to 6 percent - but they do not expect China to risk unsettling its economy with any major acceleration.
Britain's Daily Telegraph said in a report on Wednesday that "the Chinese government has begun a concerted campaign of economic threats against the United States", and was hinting that it might liquidate its holdings of US Treasuries if Washington imposed trade sanctions.
The newspaper said two senior economists at Chinese government-backed think tanks, Xia Bin and He Fan, had for the first time warned that Beijing might use its foreign reserves as a political weapon. The report added: "Shifts in Chinese policy are often announced through key think-tanks and academies."
One-year offshore non-deliverable forwards quoted the yuan at 7.1153/7.1253, implying appreciation of 6.17 to 6.32 percent in a year's time from Thursday's mid-point.
On Wednesday, NDFs dropped sharply to imply appreciation of 6.22 to 6.31 percent, compared with Tuesday's 5.51 to 5.58 percent. That brought them close to the 6.6 percent appreciation implied in late March - the highest implied forecast since the yuan's peg to the dollar was removed in July 2005.