China's yuan closed slightly higher against the dollar on Monday, despite expectations for a stronger rise after global financial leaders singled out the currency as key to tackling world-wide trade and investment imbalances.
Beijing also launched a market in currency swaps on Monday, the latest move towards creating a full range of derivative products aimed at creating a more flexible trading regime for the yuan. But dealers said that launch had no immediate impact on the yuan's spot exchange rate.
The yuan ended at 8.0150 to the dollar after the central bank fixed the yuan's mid-point at 8.0185 per dollar, weaker than Friday's close of 8.0170 but stronger than Friday's mid-point of 8.0210.
The yuan has now appreciated only a further 1.18 percent since it was revalued by 2.1 percent against the dollar last July and freed from a dollar peg to float within managed bands.
"There are no clear signs the central bank will allow the yuan to go up sharply in the near term," said a dealer at a major state bank. "Most of us still expect China to set its own pace for the yuan to appreciate." People's Bank of China Governor Zhou Xiaochuan later told reporters the yuan could probably begin to rise a bit faster but that gradualism was the central bank's guiding philosophy.
"Despite much overseas speculation on Zhou's and G7's remarks, we in the domestic market don't expect the yuan to move in line with that sort of talk," said a Shanghai-based dealer at a foreign bank. "China's central bank is unlikely to give up the independent policy on the yuan's exchange rate - at least for now."
China has fended off US pressure for a stronger yuan by consistently arguing that creating market mechanisms for greater flexibility is more important at this stage than the actual level of the yuan.
The yuan is allowed to rise or fall only 0.3 percent from its mid-point each day. Even so, it has moved only a fraction of that range for most of trading sessions so far.
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