The yuan slipped against the dollar on Thursday, partly because of the strength of the dollar on global markets, but dealers said the Chinese currency would soon resume its uptrend. Before trading began, the central bank set its daily mid-point at 7.2805, down from Wednesday's reference rate of 7.2723, as the dollar held onto overnight gains against the euro and sterling.
But dealers in the domestic market said they still expected rapid appreciation of the Chinese currency in the near term, especially after Premier Wen Jiabao warned on Wednesday that China still faced fairly large inflationary pressure.
The yuan closed at 7.2719, off an intra-day low of 7.2735 hit at the opening but down from 7.2620 at Wednesday's close. It was the Chinese currency's first daily fall this week.
However, the yuan traded well above the central bank's mid-point all day, which dealers said showed that expectations of near-term appreciation remained strong. Several said the yuan could reach 7.250 next week.
"Dealers have been making bets at levels above the mid-point, as the premier's speech suggests China will have to appreciate its currency rapidly," said a dealer with a major US bank. On the offshore market, one-year dollar/yuan non-deliverable forwards were slightly higher at 6.6891/6.6941, implying yuan appreciation of 8.76-8.84 percent from Thursday's mid-point over the next 12-month period.
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