Spot yuan ended up slightly against the dollar on Monday after China's vice premier said China would stick to appropriately loose monetary policy. Vice Premier Li Keqiang told an international tax conference on Monday that China's economic recovery had been consolidated after performing better than expected and the authorities would nevertheless stick to its active fiscal policy and appropriately loose monetary policy.
Spot yuan closed at 6.8278 on Monday, slightly firmer than Friday's close of 6.8285. Before trade began, the Chinese central bank fixed the yuan's daily mid-point at 6.8280 versus the dollar slightly weaker than Friday's reference rate of 6.8275.
Dealers said the stable mid-point meant the People's Bank of China was not in a hurry to adjust its stable yuan policy, adopted since July last year to help cushion the negative impact of the global financial crisis on China's economy.
"The stable mid-point reflects Beijing's intention to keep the yuan stable," said a dealer at an Asian bank in Shanghai. "We expect the Chinese central bank will not change the stable yuan policy until the beginning of next year." An opinion piece in the Financial News, a paper published by the People's Bank of China, said on Monday that the dollar should remain the principal currency in China's $2.27 trillion stockpile of foreign exchange reserves, but the share of the euro and yen should increase.
Dealers said this news may have impact for the dollar but little for the yuan because of the Chinese central bank's stable yuan policy. Meanwhile, the euro rose to its highest in 14 months against the dollar after the report. Offshore, benchmark one-year dollar/yuan non-deliverable forwards (NDFs) were little changed at 6.6350 bid late on Monday compared with Friday's close of 6.6380. Twelve-month yuan appreciation implied by NDFs, which moves inversely with the forwards, rose slightly to 2.91 percent measured from the Chinese central bank's daily mid-point.