China's yuan recorded its strongest ever close on Wednesday after it hit the strong-side trade band limit for a fourth time in less than a week, and held there until trading shut. The central bank set its midpoint at 6.3002 per dollar, slightly stronger than Tuesday's fix of 6.3028, as it looked to give the spot rate extra space on the strong side, while signalling its basic desire for stability.
But the room for manoeuvre didn't last long as the yuan opened at 6.2373, just one pip away from the strong-side trade band limit. That was stronger than Tuesday's close of 6.2405 That also marked a record strong open as demand for the currency rebounded after appearing to ease in the previous session.
The rate fell back to 6.2408 around midday as banks used the opportunity to buy up dollars at the day's lows. It then firmed in afternoon trading to strike the strong-side limit of 6.2372 at 4.18pm (0818 GMT) and held there until the close. The yuan reached the strong-side limit for the first time on Thursday last week. Traders said that while a natural yuan/dollar balance was getting closer, it was still unclear at what level this would set. The yuan has now appreciated 2.49 percent since a year-low in late July. "The rate will keep on strengthening, sticking close to the strong-side limit. There are still lots of people looking to sell dollars," said a trader at a large state-owned bank in Shanghai.