The Chinese yuan closed up slightly on Friday after the central bank pushed up the official midpoint amid speculation that authorities were preparing to widen its trading band. The central bank set the midpoint at 6.2395 on Friday morning, up slightly from Thursday's fix but weak enough to hold back the spot market from setting a new record.
The People's Bank of China (PBOC) allows the exchange rate to rise or fall 1 percent away from the midpoint setting on a given day. A record high of 6.1723 struck on Wednesday was out of reach on Friday due to the weaker fix, which restrains the spot rate from exceeding 6.1771 per dollar. The spot yuan closed at 6.1776 per dollar, nearly at the limit of the band. Intraday trading volume was relatively high, closing at nearly $14 billion.
UBS analysts Manik Narain and Geoffrey Yu in London said the central bank might widen the yuan trading band within 72 hours to coincide with a G20 meeting. The analysts were reacting to comments by deputy PBOC governor Yi Gang made in Washington this week in which he said China might both widen the trading band and further open the capital account in the near future.
However, traders remain sceptical, saying there has been no clear signal sent domestically that PBOC is preparing such a move. Official Chinese-language media has not given high prominence to the remarks, and economists point out that signs of enduring strong hot money inflows looking to cash in on future appreciation makes widening less likely for the present.