The yuan ended little changed against the dollar on Wednesday after the People's Bank of China set the mid-point in a narrow range, showing its intention to keep the yuan stable for a while. The market's expectation for the yuan's uptrend in the long term remains intact, but slowing growth in China and the global economy, may cap the pace of further appreciation, dealers said.
"There are no factors in the environment supporting a further rise in the yuan. Economic growth is slowing and the overseas market is still bad," said a dealer at a Chinese commercial bank in Shenzhen. Spot yuan ended at 6.2960 versus the dollar versus Tuesday's close of 6.2964 after the central bank fixed the mid-point slightly weaker at 6.2988 against 6.2960 previously. The yuan has risen 8.42 percent since its June 2010 de-peg.
The PBOC has set the mid-point in a narrow range since last week after letting it hit an all-time high of 6.2937 per dollar on February 10, which markets construed as a goodwill gesture to the United States ahead of Chinese leader-in-waiting Xi Jinping's visit to that country last week. Dealers also said the yuan's rise was restrained by the euro, which retreated from near two-week highs as optimism over the long-awaited Greek bailout deal quickly gave way to concerns about economic growth and implementation risks.
"Originally, we thought the euro could rise for a while, but it seems this round of rises has finished," said a dealer at a Chinese bank in Shanghai. In the offshore non-deliverable forwards (NDF) market, the benchmark one-year NDFs implied yuan appreciation of 0.30 percent, unchanged from Tuesday's close.
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