Offshore dollar/yuan forwards retreated nearly across the curve on Wednesday as some hedge funds and banks continued this month's rush into speculation on yuan appreciation, but dealers warned that the short end of the forward curve is implying far too much of a potential yuan rise.
Dealers said Singapore's effective revaluation of its currency had only a minor psychological impact on the yuan forwards, as most market players view China's yuan within a very different context. Rather, signs are increasing that China is unlikely to use a one-off revaluation even when it allows the yuan to resume appreciating, dealers said.
The three-month dollar/yuan non-deliverable forwards (NDFs) fell to 6.7580 bid from Tuesday's close of 6.7630, implying 1.01 percent yuan appreciation in three months as measured from the Chinese central bank's mid-point, up from 0.93 percent implied at Tuesday's close.
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