The yuan extended a rally on Tuesday to nine days, rising the most in that period since January 2008 following strong criticism from US President Barack Obama about China's currency policy. Active trading in offshore yuan forwards focused on near-term tenors after the central bank lifted the yuan's mid-point, its daily reference rate around which the currency is allowed to trade against the dollar, for a ninth consecutive day, the longest string of gains since the landmark July 2005 revaluation.
The People's Bank of China set the mid-point at 6.6997 yuan per dollar, from which the yuan can rise or fall 0.5 percent versus the dollar, compared with Monday's 6.7110. "The market is now convinced that the PBOC is taking action to let the yuan stage a mini-revaluation and many of us expect the yuan to continue to rise steadily in coming weeks to reach 6.6 or even stronger," a Chinese bank dealer in Shanghai said.
The yuan hit an intraday high of 6.6987 against the dollar in the early afternoon, breaking through key resistance at 6.7000 for the first time since the 2005 revaluation and entering a new, stronger trading range, traders said. The currency trimmed some gains late in the session, closing at 6.7079 to the dollar, up from 6.7143 on Monday and rising 1.29 percent in nine trading days. Three-month NDFs were bid at 6.6580 late on Tuesday, slightly off a record low of 6.6560 touched in early trade but still down sharply from 6.6840 at Monday's close.