Spot yuan fell against the dollar on Thursday and the Chinese currency pulled back in the offshore forwards market, as the US currency extended its gains globally. Reflecting the dollar's global strength, the Chinese central bank set the yuan's daily mid-point against the dollar at 6.8457 on Thursday, weaker than 6.8406 on the previous day.
Spot yuan came under increasing pressure in the afternoon and it closed at 6.8465, near its intra-day low of 6.8470 and down from Wednesday's finish of 6.8385. One-year offshore dollar/yuan non-deliverable forwards, which had been falling for three days, rose to 6.7631 in late trade from Wednesday's close of 6.7400.
Their latest level implied yuan appreciation of 1.22 percent against the dollar in the next 12 months from the day's spot mid-point, down from 1.49 percent at the close on Wednesday and equal to implied appreciation on Tuesday. Data on Wednesday showed China posted a record trade surplus of about $28.7 billion in August, well above economists' expectations of $23.5 billion.
The data kept alive expectations for modest yuan appreciation against the dollar in coming months, but the slowing Chinese economy and weakness of other Asian currencies against the dollar mean any sharp appreciation is not on the cards, traders said. "I think the yuan will most likely move between 6.83 and 6.85 in coming days given the strength of the dollar," said a trader with a European bank.
"I am not sure whether it will go as far as 6.70 later this year, but it should have no problem testing the 6.80 level." The yuan's post-revaluation trade high is 6.8103, hit in mid-July.
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