The yuan closed higher against the dollar on Wednesday, climbing for a second straight day as the US currency slipped globally on lingering concerns about possible interest rate cuts by the Federal Reserve. The yuan ended at 7.7295 to the dollar, marginally stronger than Tuesday's close of 7.7334, after trading between 7.7284 and 7.7313.
In global markets, the dollar fell against the yen as softer-than-expected US consumer data and lingering concerns about a slowing housing market spurred talk of possible rate cuts. Before trade began in the morning, the People's Bank of China set the yuan's daily mid-point at 7.7318, stronger than 7.7343 the previous day, which helped to set the currency on an uptrend.
Traders expected the yuan to stabilise beyond the 7.7300 level and challenge new highs in the coming days, as there were no signs that the dollar was likely to regain its momentum globally. "Even if Bernanke gives no clues regarding rate cuts in his testimony later today, a major comeback by the dollar is unlikely given weak US consumer confidence," said a trader with a major US bank.
The Conference Board's March US consumer confidence index released on Tuesday showed a fall to 107.2 from February's 111.2, reinforcing fears of an economic slowdown that could lead to interest rate cuts.
China is under pressure from its major trading partners, especially the United States, to allow faster appreciation of its currency, which many consider under-valued. But the central bank has been sticking to a gradual approach in its foreign exchange policy, fearing that any drastic fluctuations could hurt the economy.