The yuan ended almost unchanged against the dollar on Monday despite the mid-point being set at a more than two-week high and a weaker US dollar after strong housing sales and upbeat comments from Federal Reserve Chairman Ben Bernanke reduced the safe-haven appeal of the US currency.
At an annual Fed conference on Friday, Bernanke gave his clearest signal yet that a recovery is at hand, although he warned that growth would be sluggish. Dealers also said the yuan was unlikely to budge much in the near term as China's leadership keeps a tight leash on the currency to ensure stable economic growth.
The yuan would also be underpinned by recent policies being put in place to boost its use in trade settlements. Before trade began, the central bank fixed the yuan's daily mid-point at a more than two-week high of 6.8309 versus the dollar on Monday, up from Friday's 6.8313. The US dollar index had fallen 0.43 percent late last week.
Spot yuan closed at 6.8313, barely changed from Friday's close of 6.8312. "The dollar resumed its broad weakness which guided the central bank to set the mid-point higher," said a dealer at an Asian bank in Shanghai. "But it's clear that the central bank will keep the yuan stable for a while, so the yuan may trade around 6.8300." Premier Wen Jiabao said on Monday that China would maintain its stimulative policy stance because the economy was facing fresh difficulties, such as a slowdown in demand for exports.
After a trip to the eastern province of Zhejiang, known as a hotbed of private enterprise, Wen was quoted as saying on a government website that Beijing would ensure a sustainable flow of credit and a "reasonably sufficient" provision of liquidity to support growth. Offshore, benchmark one-year dollar/yuan non-deliverable forwards (NDFs) fell to 6.7862 bid late on Monday from Friday's close of 6.7910. Twelve-month yuan appreciation implied by NDFs, which move inversely with the forwards, rose to 0.66 percent when measured from the Chinese central bank's daily mid-point, compared with 0.59 percent implied on Friday.
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