The yuan fell against the dollar on Thursday, propelled by a rise of the US currency on global markets as investors cut their bets on risky assets following a drop in retail sales in the world's largest economy. Spot yuan ended at 6.8250 versus the dollar on Thursday, at the same level where the central bank set the mid-point earlier in the day, and down slightly from Wednesday's close of 6.8224.
Before trade began on Thursday, the People's Bank of China set the yuan's mid-point, or its reference rate, at 6.8250 against the dollar, weaker than Wednesday's 6.8235 and reflecting the dollar's resilience in global markets. The dollar held on to some of its strongest levels this week after bleak US retail sales data rekindled worries about the economy and dented hopes it would soon emerge from recession.
"The yuan's fall today purely reflected the dollar's global rise and does not represent a trend," said a dealer at a European bank in Shanghai. "We still expect the yuan to remain stable in the short term." He and several other dealers said the yuan was likely to move mainly between 6.8200 and 6.8300 in the coming two weeks.
Dealers said the authorities would likely keep the yuan stable ahead of the visit to Beijing by US Treasury Secretary Timothy Geithner next month to discuss Sino-US economic ties. China typically maintains the stability of its currency during sensitive periods such as ahead of economic talks with major trader partners, including the United States.
Also, China may uphold its current stable yuan policy for now as its economy has shown some signs of improvement but the jury is still out on whether it is on track for a full recovery.
On Thursday, the National Bureau of Statistics said Chinese industrial profits in the first quarter in 22 Chinese provinces fell a steep 32.2 percent from a year earlier. Profits in the first two months of 2009 had been down 39.5 percent from the corresponding period last year, pointing to something of a recovery in March, the statistics office said in a statement on its website.
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