The yuan fell in the spot market on Monday, pressured by the dollar's continuing strength against a basket of currencies and after the central bank set the currency's mid-point, or reference rate, at a two-month low. Before trade began on Monday, the People's Bank of China fixed the yuan's daily mid-point at 6.8365, the lowest since April 8 and down from Friday's reference rate of 6.8334.
Spot yuan closed at 6.8371 against the dollar, down from Friday's close of 6.8330. "Despite the dollar's sharp rise, the central bank just set the mid-point a little weaker from Friday," said a dealer at a European bank in Shanghai. "That means the central bank will still keep the yuan stable in the near term." The dollar index, a gauge of the US currency's value against a basket of six major currencies, rose above 81 for the first time since late May. The dollar index rose 1.6 percent on Friday, Reuters data showed.
A researcher with the country's top think tank was quoted by state media as saying that the Chinese economy had bottomed out but would need two to three years to regain its rapid growth. "Although the economy has bottomed out, it is touching a flat bottom, instead of a V-shaped bottom," Zhang Wenkui of the State Council's Development Research Center was quoted by Xinhua as saying on Sunday.
The Ministry of Finance said on Monday that China was increasing rebates of value added taxes to exporters of more than 600 product lines, including some electronics, machinery, steel, toys and furniture. This is the seventh time that the government has raised VAT rebates since last summer to help exporters hard hit by the slump in global demand.
Offshore, one-year dollar/yuan non-deliverable forwards (NDFs) rose to be bid at 6.7270 late on Monday from Friday's close of 6.6910. Their latest level implied yuan appreciation of 1.63 percent over the next 12 months from the day's spot mid-point, compared with 2.13 percent implied at Friday's close.
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