China's yuan ended higher against the dollar on Thursday, posting its second biggest daily gain since its 2005 revaluation as the Chinese central bank appeared to shift tactics to allow longer stretches of yuan appreciation, traders said.
The dollar's slide to record lows in global markets, and perhaps rising European diplomatic pressure, had triggered the change, they said. In the past, it engineered a pause in yuan appreciation every few days to reduce volatility and deter speculators.
But it may now permit periods of appreciation lasting several weeks, and possibly allow a slight acceleration of appreciation on an annual basis, the traders said. A Shanghai dealer at a European bank added: "The central bank appears to have changed to a new tactic of three steps forward, one step back for the yuan, compared with its previous tactic of two steps forward, one step back."
The yuan closed at 7.4207 to the dollar, up 0.29 percent from Wednesday's close and its second biggest daily gain since Beijing abolished the yuan's peg to the dollar and revalued it in July 2005. The close was only two pips lower than an intraday high of 7.4205, the yuan's post-revaluation trading peak.
The Chinese currency jumped in response to guidance from the central bank, which before trade began set a daily mid-point for the yuan of 7.4251 to the dollar, up from 7.4476 on Wednesday and much higher than the market had expected. It was the third biggest rise between mid-points since the revaluation. The two largest increases occurred in June and July of this year.