China's central bank guided spot yuan to end slightly higher against the dollar on Tuesday as it let rates on its short-term bond repurchase operations rise for a second straight week. The People's Bank of China fixed the yuan's daily mid-point, or reference rate, marginally higher on Tuesday, showing no intention of allowing the yuan to move away from its effective peg against the dollar.
The central bank has maintained the peg at around 100 pips since late last year. Spot yuan closed at 6.8327 against the dollar, up from Monday's close of 6.8345 after the central bank fixed the mid-point at 6.8326 from Monday's 6.8330.
In the money market, the central bank let the rates on its short-term repos rise for a second straight week, suggesting the bank was guiding an upward leg in the short end of money market rates in an apparent effort to prevent the risk of inflation.
The central bank drained 90 billion yuan via 28-day repos at a rate of 1.00 percent on Tuesday, up from 0.95 percent on such operations conducted last week, when it let it rise 5 basis points - allowing rates to rise for a second straight week after keeping them flat in the first half of this year.
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