The yuan edged lower against the dollar on Wednesday despite the Chinese central bank setting the mid-point at a more than three-month high and the dollar's fall against a basket of major currencies, as investors sold the low-yielding US currency in a renewed shift to risker assets.
The dollar got some respite after sharp selling the previous day, weighed down by renewed questions over its long-term status as the world's reserve currency. The dollar index shed more than 1 percent overnight to hit a one-year low of 77.047.
Spot yuan closed at 6.8288, slightly lower than Tuesday's close of 6.8275. Before trade began, the Chinese central bank fixed the yuan's daily mid-point at 6.8292 versus the dollar, the reference rate's highest level since May 26 and up from Tuesday's 6.8300. It was the first time in more than three months that the mid-point has risen above 6.8300.
"The dollar's decline overnight makes the central bank set the mid-point higher than 6.8300," said a dealer at a European bank in Shanghai. "If the dollar continues to fall, the mid-point may move out of the range of 6.8300, but the yuan may not appreciate too much as China should keep the yuan stable to ensure that the economic recovery is on the right track."
Offshore, benchmark one-year dollar/yuan non-deliverable forwards (NDFs) fell to an intraday low of 6.7250 bid on Wednesday, their lowest since June 15 and down slightly form Tuesday's close of 6.7290.