China's yuan slipped against the dollar on Tuesday, after hitting fresh post-revaluation highs for four straight trading days, as the central bank set the yuan's mid-point at a much weaker level.
The yuan closed at 7.8669 to the dollar, versus its previous close of 7.8667. It had hit an intraday high of 7.8623 on Monday, the highest level since Beijing revalued the yuan by 2.1 percent and freed it from a dollar peg in July 2005.
Some dealers attributed the fall to a weaker mid-point set by the central bank in the morning, which most of the time trails the movement of the dollar in the global markets. Tuesday's mid-point was 7.8703 versus the dollar, compared to a record high of 7.8644 the previous day.
Others say the yuan is taking a break before another round of faster ascents. The currency had moved within a narrow range near the mid-point most of the day. Even a strong rally by the yen failed to lift up the Chinese currency. Latest official data showed that China's annual growth in the broad M2 measure of money supply accelerated to 17.1 percent in October, up from 16.8 percent in September.
That figure - despite a barrage of measures in recent months to curb credit and investment growth - is putting more pressure on Beijing to seriously consider adding foreign exchange policy into its macro-control tool kit, analysts and traders said.
The yuan has appreciated a further 3.09 percent against the dollar since July 2005. Many traders expect it to stabilise at between 7.80 and 7.85 versus the dollar by the end of this year. One-year offshore NDFs quoted the yuan at 7.5580/7.5630 to the dollar, forecasting a yuan rise of between 4.06 and 4.13 percent from Tuesday's mid-point.