China's yuan, which has hit record highs against the dollar seven times this month, closed slightly weaker on Tuesday after the central bank set a slightly lower midpoint to signal a pause in the currency's appreciation. Spot yuan closed at 6.1215 against the dollar, down slightly from 6.1211 at the close on Monday when the currency reached an intraday high of 6.1210, its highest since China set up the domestic foreign exchange market in 1994.
Before Tuesday's trade began, the People's Bank of China (PBOC) fixed the yuan's midpoint at 6.1818, marginally lower than Monday's record high midpoint of 6.1811. The yuan is allowed to rise or fall 1 percent in a day from the PBOC's base rate. The central bank has guided the yuan to a series of record highs since early April as the government appears to be gradually moving to create conditions for a more flexible exchange-rate regime, traders said.
By letting the yuan rise, the PBOC hopes to find the range where supply and demand for dollars is balanced, traders said, but this has yet to be found yet as the currency continues to trade near the strong end of the trading band. The yuan has appreciated in inflation-adjusted terms against a basket of global currencies every month since September 2012, according to the Bank for International Settlements in Basel, Switzerland.
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