The Chinese central bank allowed the yuan to trade slightly stronger on Tuesday, but it was still not enough for a market overloaded with dollars as the yuan spent most of the day at the limit of its trading range. The yuan closed at 6.2326 per trade, firming from Monday's close of 6.2345.
The People's Bank of China (PBOC) fixed the official midpoint rate at 6.2926 per dollar, compared to Monday's fix of 6.2975, allowing the yuan to trade in a stronger range for the first time since last Wednesday, when the Chinese currency hit a record high against the dollar.
The spot yuan began softening abruptly with less than half an hour to go to market close after spending most of the day changing hands at 6.2297, the strong-side limit of its trading band. Economists and traders have speculated that such unusual spikes may represent attempts by the central bank to soften the exchange rate through intermediary state-owned banks. Last-minute abrupt softening moves in the rate have occurred frequently in recent weeks, but have not been sustained. Under China's managed float regime, the dollar/yuan exchange rate is allowed to diverge away from the official midpoint rate by 1 percent in either direction.
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