The yuan closed up against the dollar after hitting a record trading high on Monday, as the People's Bank of China set an all-time high mid-point fixing, following the sinking dollar index "It seems that the central bank intends to take advantage of the weakening dollar to nudge its currency up further in the short-term," said a trader at a medium-sized bank in Shenzhen.
Spot yuan closed at 6.4340 versus the dollar, stronger than Friday's close of 6.4366. In intraday trading, the currency hit an all-time high of 6.4336. It has now appreciated 6.10 percent since it was depegged from the dollar in June 2010 and 2.42 percent so far this year. Before trade began the PBOC fixed the yuan's mid-point at a record high of 6.4399 against the dollar, stronger than last Friday's 6.4442.
Dealers also said that the expectation of higher consumer prices in July could prompt the central bank to quicken the pace of yuan appreciation, a way of curbing stubbornly high inflation. The central bank on Monday said it would keep using a range of policy tools, including interest rates and foreign exchange rates to tame still strong inflation. Offshore, benchmark one-year dollar/yuan non-deliverable forwards (NDFs) were bid at 6.3660 in late trade, firmer than 6.3820 at the previous day's close. Their implied yuan appreciation in a year's time rose to 1.16 percent from 1.00 percent.