The yuan closed up against the dollar on Tuesday, strengthening as much as 0.25 percent in intraday trade to hit a post-revaluation high of 7.3770 to the dollar, after the Chinese central bank set a strong mid-point ahead of trade talks between China and the United States.
But dealers said the yuan would probably have a ceiling of around 7.3600 in coming days, partly due to the possibility that Beijing would ask some Chinese banks to pay the latest rise in bank reserve ratios in dollars, not yuan.
"Today's yuan rise is partly a goodwill gesture to the United States ahead of the Sino-US trade talks," said a dealer at a major Chinese state-owned bank in Beijing.
In conciliatory remarks before the talks, Paulson acknowledged on Friday that China had stepped up the pace of yuan appreciation, though he called for further acceleration. The yuan hit a high of 7.3770 in early trade, exceeding its previous post-revaluation peak of 7.3800 touched on November 30. It then pulled back slightly to close at 7.3805 but was still up solidly from Monday's close of 7.3952.
Before trade began, the central bank set the yuan's daily mid-point at a post-revaluation high of 7.3797, up 0.21 percent from Monday's reference rate of 7.3953.
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