China's yuan ended lower on Wednesday, although the central bank fixed the mid-point near a record high again ahead of the Group of 20 summit. The People's Bank of China set the mid-point at 6.3297 versus the dollar before trading started, compared with 6.3293 on Tuesday and the record high of 6.3233 on Monday.
Traders attributed the firm fixing to Beijing's intention to guide its currency up before a gathering of the world's top leaders in France on November 3-4 to discuss how they can contain the eurozone debt crisis. "The high mid-points fuelled market expectations for a stronger yuan," said a Shanghai-based trader at a Chinese bank.
However, some big banks bought dollars from the market to support China's imports of crude oil and Chinese firms' investments abroad at the beginning of the month, driving up the dollar/yuan exchange rate, which can move up or down 0.5 percent from the mid-point in each trading day. The yuan traded in a narrow range between 6.3466 and 6.3585 against the dollar and ended at 6.3573, down from Tuesday's close of 6.3543.
The Chinese currency has gained 3.66 percent against dollar so far this year. It resumed appreciation in October, moving up 0.49 percent, after losing 0.12 percent in September. Some traders had expected the yuan to test the level around 6.32 versus the dollar this week and then ease back after the G20 meeting.
But some economists believe China may be preparing to slow the appreciation of its currency, given the slowing export growth, as its biggest trading partner struggles with a sovereign debt crisis. China's Vice Finance Minister Li Yong said on Wednesday the world's second-largest economy was on the right track and Beijing would take a flexible policy approach to deal with the risks it faces.
Offshore, spot yuan strengthened to trade at 6.3890 versus the dollar, from Tuesday's close of 6.4100. The one-year non-deliverable forwards moved up slightly to 6.3695, after it ended at 6.3750 on Tuesday. That implied a depreciation of 0.62 percent in a year's time versus a depreciation of 0.72 percent on Tuesday.