The yuan ended slightly down against the dollar on Wednesday as the dollar hovered at six-week highs, but the Chinese currency traded above the People's Bank of China's reference rate. Spot yuan closed at 6.7986 per dollar on Wednesday, up 0.41 percent against the dollar since the Chinese currency was depegged on June 19. That compares with Tuesday's close of 6.7972 or a 0.43 percent rise.
It moved in a small range of 6.7974 to 6.8002, trading above the central bank's daily mid-point of 6.8007, which was lower than Tuesday's 6.7999. But traders doubt the PBOC will continue holding the fixing above 6.80 for an extended period, and may resume appreciation in the yuan within the year.
"The strong dollar gives the central bank a chance to weaken its mid-point, but investors think the fixing will not be sustained above 6.8 for long and it guided them to sell dollars," said a dealer at an European Bank in Shanghai. "And we still expect the yuan will appreciate steadily and slowly after China's economy firms up," he said.
Several dealers said the yuan would trade between 6.7850 and 6.8050 against the dollar in coming days, with the central bank's guidance via its mid-point playing a key role in setting direction. Dollar/yuan NDFs were little changed with traders wary of taking on new positions and awaiting cues from yuan spot moves. One-year NDFs last traded at 6.6861, barely changed from late Tuesday's 6.6880, pricing in 12-month yuan appreciation of 1.71 percent.
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