China's yuan traded narrowly against the dollar on Wednesday as a dollar short squeeze, which had kept the Chinese currency under pressure for two days, appeared to fade. The yuan was at 7.9960, firmer than Tuesday's close of 7.9995, as the central bank sat back and let the Chinese currency rise against a softening dollar.
The central bank set a yuan mid-point of 7.9944, sharply stronger than Tuesday's close of 7.9995, suggesting to traders that the yuan might soon resume its gradual uptrend.
North Korea fired a series of missiles on July 4, pushing gold prices up and causing many Asian currencies to weaken briefly. But by the end of the Asian trading day, the dollar had given back many of its gains. "Demand for the yuan rises immediately whenever the dollar eases globally these days," said a trader with a Shenzhen-based lender.
"Support for the yuan at 8.0 is getting stronger. It could stay above that level if there is no major turnaround of the dollar globally." The yuan's peak since it was floated was 7.9915, reached early on Monday, but a shortage of dollars later on Monday caused the yuan to weaken sharply that day.