The yuan closed up against the dollar on Wednesday and is expected to rise at a quicker pace in the next week or two, influenced by politics as Chinese and US officials meet next week to discuss trade matters, dealers said.
Vice Premier Wu Yi will lead a delegation of top Chinese officials to Washington next week for the second round of a strategic economic dialogue with the United States, at which the two are expected to discuss a range of economic and trade issues.
The United States has been pushing China to take more steps to trim its large trade surplus, including allowing the yuan to rise more quickly and opening up markets for a range of industries. The yuan closed at 7.6820 to the dollar, up from Tuesday's close of 7.6868. It had fallen slightly earlier this week after climbing an unusually brisk 0.36 percent last week.
The People's Bank of China, the central bank, set the tone for the yuan's rise on Wednesday by fixing its mid-point before the start of trade at a much stronger 7.6840 to the dollar, compared with Tuesday's mid-point of 7.6948.
The mid-point is a reference point used by the central bank to indicate its intentions on how the yuan should move during the day. "China will at least pose some good-will gesture to the United States in the next one or two weeks, so it's likely to allow the yuan to gain at a faster pace than it had seen over the past few months," said a Shanghai dealer at a European bank.
The yuan is expected to rise to test the psychologically important 7.6500 mark before the end of next week, dealers said. Ahead of next week's discussions, China vowed on Wednesday to take further measures to ease its booming trade surplus, although it also called on the United States to treat it as an equal. One-year offshore non-deliverable forwards quoted the yuan at 7.2589/7.2639, indicating appreciation of 5.78 to 5.86 in one year's time from Wednesday's yuan mid-point.
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