Benchmark offshore one-year dollar/yuan non-deliverable forwards (NDFs) hit a seven-week high on Monday as the dollar kept its recent gains while dealers said the Group of Seven's meeting will not have an impact on yuan policy, which may reduce some pressure on yuan appreciation.
At the weekend G7 meeting of finance ministers and central bank governors, no new statement on currencies was issued, but support was rising for a levy on banks that could pay for global governments' rescue of the financial system. Offshore benchmark dollar/yuan NDFs hit an intraday high of 6.6880 bid on Monday, its highest level since December 22, up from Friday's close of 6.6775.
Twelve-month yuan appreciation implied by NDFs fell slightly to 2.08 percent, the lowest level since December 29, measured by the Chinese central bank's daily mid-point, from 2.24 percent implied at Friday's close. The dollar index, which tracks the performance of the dollar versus a basket of six major currencies, fell slightly to 80.160, having risen to a seven-month high last Friday.
It touched 80.683, its highest since July 9, 2009. But China is still facing domestic pressures to let the yuan appreciate as a means to contain rising inflationary pressures from improving economic conditions. The official Xinhua news agency reported on Sunday that an official think tank had forecast China's exports would rise 16.6 percent and imports by 18.9 percent, with the overall value of foreign trade up 17.6 percent.
Spot yuan closed at 6.8267 per dollar on Monday, slightly firmer than Friday's close of 6.8271. Before the start of trade, the People's Bank of China (PBOC) fixed the yuan's daily mid-point at 6.8273 per dollar, barely changed from Friday's 6.8272.
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