Chinese yuan closed higher against the dollar on Tuesday, bouncing from a seven-week low hit on Monday as the US currency weakened on global markets.
But trade remained narrow as the central bank, the People's Bank of China, continued to keep the market guessing about plans to reform China's rigid foreign exchange regime.
The yuan finished at 8.0240 to the dollar compared with Monday's close of 8.0260, which was the weakest close since March 30, when the yuan ended at 8.0268.
"Global dollar weakness helped the yuan rebound slightly today," said a dealer at a major Chinese commercial bank. "But the yuan's performance over the past week has generally been weak and hasn't lived up to the market's expectations."
On global markets, the dollar fell solidly against the yen on Tuesday after ratings agency Standard & Poor's revised its rating outlook for Japan to positive from stable.
Shanghai dealers continue to expect the yuan to appreciate in the medium term. On May 15 it briefly broke through 8.00 to hit 7.9972, its strongest level since Beijing revalued the currency by 2.1 percent and freed it from a dollar peg in July last year. Last weekend, the PBOC pledged again to work towards a more flexible exchange rate regime.
But the central bank's daily settings of the mid-point of the yuan/dollar rate have convinced many traders that it still does not want to see major volatility in the near term. The yuan can theoretically rise or fall 0.3 percent from its mid-point each day, but it has moved only a fraction of that range in most trading sessions so far.
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