The yuan fell back sharply against the dollar in the spot and forwards markets on Monday in response to a global rebound of the US currency. "The yuan is under pressure to consolidate after rising in four out of five days last week. It is most likely to move sideways against the dollar or even pull back a little this week," said a Shenzhen-based bank trader.
Before the start of trade, the Chinese central bank set the yuan's daily mid-point at 6.8397, down from Friday's 6.8357. This pushed spot yuan down to close at 6.8481 against Friday's finish of 6.8333. A couple of late dollar buying orders pushed the yuan as low as 6.8520 in the final five minutes of trade.
One-year dollar/yuan non-deliverable forwards rose to 6.6570 in late trade from Friday's finish of 6.6255. Last week they broke their uptrend channel from mid-July, suggesting the market had finished aggressively cutting back its expectations for long-term yuan appreciation. But late on Friday, one-year NDFs bounced from chart support at 6.58-6.60, their lows in early August.
NDFs' latest level implied yuan appreciation of 2.74 percent against the dollar over the next 12 months from the day's mid-point, down from 3.17 percent implied at Friday's close and 3.61 percent on Thursday. Implied appreciation hit a year-low of 1.94 percent last week, so some traders think it may now be settling into a range of about 2 to 4 percent. One-month NDFs on Monday implied the yuan would stay flat over the next four weeks.
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