The yuan rose to a one-month high against the dollar on Thursday after the Chinese central bank fixed the mid-point of the yuan outside the firmer end of a range it has mostly maintained since mid-December, though the US currency remained strong in global markets.
Dealers said recent signs that China's economy might have bottomed out may convince the People's Bank of China that it is time to let the yuan test higher levels, but overall weak economic conditions globally could limit the upside.
China on Wednesday said its economy was on the road to recovery, even as the International Monetary Fund forecast the deepest contraction in the global economy since World War Two.
Spot yuan hit an intraday high of 6.8287 against the dollar on Thursday, the highest level since March 20. It fell back slightly to close at 6.8299 on Thursday, still up marginally from Wednesday's close of 6.8300. Before trade began, the central bank set the yuan's daily mid-point at 6.8295, up from Wednesday's reference rate of 6.8306 and outside the firmer end of 6.8300 to 6.8399 range it had mostly maintained over the past four months.
Thursday was only the fourth time that the central bank set the mid-point slightly outside the range since mid-December. On March 20, the central bank fixed the mid-point at 6.8293 after the US Dollar Index hit a 10-month low of 82.631. On April 14 and 15, it let the mid-point stray out of the firmer end of the range when the index was near 85.
But the dollar index was trading firmly above 86 on Thursday. Echoing spot yuan, one-year NDFs fell to 6.7830 bid late on Thursday from Wednesday's close of 6.7930, implying yuan appreciation of 0.69 percent over the next 12 months from the day's mid-point, compared with 0.55 percent implied at Wednesday's close.
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