China's yuan hit a fresh post-revaluation high against the dollar on Friday, continuing a rebound that began after Chinese inflation and trade data this week suggested a need for continued yuan appreciation.
The Chinese currency also bounced against the dollar in the offshore forwards market, though traders do not expect an extended, aggressive upward test there because of growing signs that China is shifting its policy to appreciating the yuan versus a basket of currencies, instead of focusing on the dollar.
"The market expects the yuan to continue to rise in coming months as all key data released this week pointed to the need for China to make further efforts to fight inflation, including imported inflation," said a dealer at a US bank in Shanghai.
Spot yuan hit a post-revaluation high of 6.9013 in late trade on Friday and closed at 6.9018. That was up from Thursday's finish of 6.9075, when the yuan hit its previous post-revaluation peak of 6.9045. One-year dollar/yuan non-deliverable forwards fell considerably to stand at 6.5450 bid in late trade against Thursday's close of 6.5810.
The drop triggered a minor head and shoulders pattern formed by this month's highs, appearing to signal that NDFs had finally peaked after strength over the past two months, and faced solid resistance at their May and June highs of 6.625-6.641.
Their latest level implied yuan appreciation of 5.45 percent in 12 months from Friday's spot mid-point, up from 4.87 percent implied on Thursday and levels below 4 percent touched early this week. But implied appreciation is still far from a post-revaluation high of 13.8 percent set in mid-March.