China's yuan slumped sharply against the dollar on Friday, as the US currency maintained its strength globally. But traders say the yuan, which had briefly breached the barrier of 8.0 to the dollar on Monday for the first time in a dozen years, could soon regain its strength and possibly top that level again in the near future.
The yuan ended weaker at 8.0220 to the dollar compared with Thursday's close of 8.0100, after the central bank set the daily mid-point of its exchange rate at 8.0150, stronger than 8.0180 on the previous day.
On the global front, the US currency vaulted higher against the euro and the yen on Friday, after a Bank of Japan governor indicated the bank wouldn't rush to raise interest rates.
"The yuan trailed the dollar throughout the day, chalking up a mild gain when the dollar stayed relatively weak, then plunging when it firmed up," said a trader with a Shanghai-based trader.
But the yuan is getting ready for a rebound soon after two consecutive days of recess, others said, resuming a gradual but steady climb begun after Beijing revalued its currency by 2.1 percent and freed it from a dollar peg.
"I will not be surprised to see it challenging 8.0 soon, given the strength of China's economy," said a trader with a state lender.
The yuan - which had hit 7.9972 on Monday morning - has strengthened a further 1.1 percent since the July policy move.
On Friday, one-year onshore yuan forwards were quoted at 7.75 per dollar, anticipating that the yuan will be 3.4 percent stronger in a year's time.
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