The yuan closed slightly lower against the dollar on Friday, despite the People's Bank of China fixing a near record high mid-point, as dealers became less certain over how quickly the Chinese currency would rise in the coming months. The market expects the yuan to continue its appreciation in the second half of this year but the pace of its rise has become less clear due partly to falling global commodity prices - a major cause for China to let its currency to add value.
China's high inflation, which has been propelled by food prices and is expected to rise to 6 percent in June after hitting a 34-month high of 5.5 percent last month, is not seen a direct stimulus for yuan appreciation, traders said. China's moderating economy after a slew of official monetary tightening steps since last October may also push the government to think twice about its unofficial target for yuan appreciation for the rest of this year, they said. Spot yuan closed at 6.4649 on Friday, weaker from Thursday's close of 6.4640. It has now appreciated 5.59 percent since it was depegged from the dollar in June 2010 and 1.93 percent so far this year.
Before trade began the PBOC fixed the yuan's mid-point at 6.4685 against the dollar on Friday, near its record high of 6.4683 set on June 22 and stronger than the previous day's 6.4716. Last month, the yuan rose only 0.2 percent following a similar pace of gain in May and compared with a 0.9 percent rise it marked in April, with falls in global commodity prices seen a major factor for the moderate rise allowed by the PBOC.
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