China's yuan rose against the dollar for a third session in a row and closed at a post-revaluation high on Tuesday after French President Nicolas Sarkozy called for a stronger yuan but dealers said a market correction appeared likely in the near term.
The yuan ended at 7.3840 on Tuesday, the highest since it was revalued against the dollar in July 2005 and up from Monday's close of 7.3969. Before the market opened on Tuesday, Beijing set the mid-point of the yuan's exchange rate against the dollar at 7.3872, also the highest mid-point since the revaluation. The yuan may rise or fall 0.5 percent from its mid-point each day.
The yuan rose despite a surprising rebound in the dollar versus the yen and the euro on Tuesday. "The yuan's strength is also linked to Sarkozy's visit, of course," said a currency dealer at a major Chinese bank, adding that while the yuan's long-term upward trend remained intact, it could begin a correction phase soon and return to the 7.40 level.
The dollar jumped against the yen on Tuesday as investors took news that Citigroup Inc would sell a stake to the Abu Dhabi government as a sign that financial institutions were recovering from a meltdown in the US subprime mortgage market and the resulting credit crunch.
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