The yuan closed at a record high against the dollar for a third straight day on Wednesday, but dealers complained that the central bank's reluctance to let the spot market take the yuan even higher was choking off trade. The yuan ended at 6.2252 per dollar, the strong-side limit of its trading band and where it started the day, versus Tuesday's close at 6.2265.
The People's Bank of China (PBOC) set its midpoint at 6.2881 per dollar on Wednesday, slightly stronger than Tuesday's fix of 6.2891. Under China's managed float for the yuan, the spot exchange rate is allowed to diverge by 1 percent in either direction from the official midpoint set at the start of each trading day.
But for the past seven trading days, the spot market has moved straight to the strong side limit of the yuan's trading range, after the central bank fixed midpoints that reflected official desire for stability rather than market pressures for a stronger yuan. A recent recovery in China's exports had added to the dollar selling.
The yuan's recent strength has also defied a rally in the dollar index, which has risen more than 2.6 percent since mid-October. The yuan usually inversely tracks the dollar against a euro-dominated basket of global currencies. The yuan has strengthened 2.7 percent against the dollar since a year-low in late July and 1.1 percent since the start of 2012.
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