The yuan eased against the dollar in volatile trading on Thursday after hitting a high of 7.7170 per dollar, although dealers blamed the brief spike on an apparently mistaken quote from a market maker.
The yuan closed at 7.7263 per dollar, versus 7.7161 on Wednesday, after the central bank set the Chinese currency's daily mid-point at 7.7199 before trade began, up from Wednesday's mid-point of 7.7203. Thursday's mid-point was weaker than the yuan's close the previous day, a reflection of relatively strong US macroeconomic data announced on Wednesday evening, dealers said.
"Today's yuan performance was partly influenced by the relatively good US economic data announced yesterday," said a dealer at a Chinese bank. New orders for US-made durable goods were surprisingly strong in March, the US government reported on Wednesday, but softer-than-forecast sales of new homes took the glow off a pickup in investment spending.
Two dealers said they believed the intraday high of 7.7170 on Thursday - close to its post-revaluation high of 7.7158 set the day before - was due to a wrong quote from a market maker and the order was later processed.
"This should not be counted as an effective breakthrough," one dealer said. Another added that only about $1 million was traded at that level. The yuan hit a low of 7.7350 per dollar, for one of the most volatile trading days in recent weeks. The yuan may rise or fall 0.3 percent from its mid-point each day, but it has moved only a fraction of that range in most trading sessions since the floating-rate regime was introduced in 2005.
Also weighing on the yuan were comments by Zhu Hongren, an official of the National Development and Reform Commission, that China's first-quarter macroeconomic data did not suggest that the economy was overheating, the second dealer said.
"That means China does not need to raise interest rates soon, which can reduce some short-term upward pressure on the yuan," he said. Dealers said the yuan remained in a long-term upward trend against the dollar. The dollar fell to a record low against a trade-weighted basket of major world currencies calculated by the Federal Reserve, as the data has done little to turn around expectations of a slowdown in the US economy and a cut in interest rates.