The Chinese central bank guided the yuan lower against the dollar on Wednesday, indicating it may be engineering another slowdown of yuan appreciation despite this week's call by G8 leaders for a stronger yuan.
In a statement on Tuesday, the second day of the Group of Eight's three-day annual summit, the G8 made a veiled call for China to let the yuan's tightly controlled exchange rate appreciate to help reduce global financial imbalances. French President Nicolas Sarkozy said the G8 leaders saw yuan exchange rates as a problem.
"But the market believes the latest G8 rhetoric is basically just a cliche - it has been repeated so many times," said a dealer at a North American bank in Shanghai.
"The market thinks the (Chinese) central bank has its own informal targets for how much the yuan should rise in a certain period, which are unlikely to be affected by routine appeals for a stronger yuan regardless of where they come from."
The central bank fixed a weaker daily yuan mid-point of 6.8632 against the dollar on Wednesday against Tuesday's 6.8581. This left the reference rate lower than its level of 6.8591 at the end of June. The yuan traded in a range of 6.8561 to 6.8634 on Wednesday before finishing at 6.8570, weaker than Tuesday's close of 6.8510 but stronger than the mid-point. There were ample dollar supplies from foreign trade, dealers said.
"The central bank appears to be planning a slowdown of yuan appreciation for the time being at least, but dollar settlement requirements from exporters have prevented the yuan from falling further," said a dealer at a Chinese state-owned bank in Beijing. "So even if the central bank continues keeping the mid-point at low levels in coming days, the yuan may stay stronger than the mid-point."