China's yuan hit a fresh post-revaluation high against the dollar on Friday, but dealers saw this as a response to the US currency's weakness abroad rather than a sign that yuan appreciation would accelerate.
Before trade began, the Chinese central bank set the yuan's mid-point at 7.5050, the strongest level since the July 2005 revaluation and up sharply from Thursday's reference rate of 7.5175. This boosted the yuan to a post-revaluation high of 7.5025 on Friday afternoon, and the Chinese currency closed at 7.5036 against Thursday's finish of 7.5145.
But traders said the central bank was permitting the yuan's relatively sharp rise only because of the dollar's sharp fall to fresh lows against the euro and other major currencies. "The strong mid-point today is mostly tied to an extraordinarily weak US dollar globally," said a trader with a major European bank in Shanghai. "The yuan could now consolidate its gains for a while, as it has done previously after hitting new highs, before it actually tests 7.5000."
The yuan did not move far on the strong side of its mid-point on Friday - a sign that the market did not believe the central bank wanted 7.5000 to be broken soon, perhaps not before China's long holiday at the start of October.