The yuan reached its highest level against the dollar in eight months in the benchmark offshore non-deliverable forwards (NDFs) on Monday after the Chinese central bank signalled once again its intention to allow the yuan to appreciate slightly. The People's Bank of China set the yuan's daily mid-point at 6.8225, the reference rate's highest level since September 26 and up from Thursday's 6.8250.
Friday was a public holiday in China. One-year dollar/yuan NDFs hit an eight-month low of 6.7050 bid on Monday, its lowest level since September 2, and implied yuan appreciation of 1.75 percent over the next 12 months from the day's spot mid-point, the strongest implied yuan appreciation since early September.
Propelled by China's improving economy, the Chinese central bank began allowing the yuan to appreciate slightly late last month for the first time since mid-December. Spot yuan ended at 6.8230 versus the dollar on Monday, flat from Thursday's close of 6.8230, after hitting an intraday high of 6.8206, its highest level for the year.
Dealers said spot yuan was now poised to breach the firmer end of a narrow range of 6.8200 to 6.8600 it has moved since the start of this year. "The signal sent by the central bank to allow the yuan to appreciate slightly was the main reason for the yuan to rise today and over the past several days," said a dealer at a European bank in Shanghai.