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China's yuan pulls back from 9-1/2-month high after modest US dollar gains
[SHANGHAI] China's yuan pulled back from its strongest in nine-and-a-half months on Wednesday, after the central bank lowered its official guidance following a modest bounce in the US dollar.
The People's Bank of China set the midpoint rate at 6.7205 per US dollar prior to market open, weaker than the previous fix 6.7148.
In the spot market, the yuan opened at 6.7258 per US dollar and was changing hands at 6.7263 by midday, easing off its best levels since October struck on Tuesday.
The renminbi is 53 pips weaker than the previous late session close and 0.09 per cent softer than the midpoint.
Traders said market supply and demand were balanced in morning trade. The yuan continued tracking the dollar's movements, with the market divided around 6.7250 per US dollar.
One trader said some institutions were liquidating their US dollar positions around that level to reduce exchange losses in the wake of a slight recovery in the US currency.
Ken Cheung, senior Asian FX strategist at Mizuho Bank in Hong Kong, cited the risk of a potential rebound in the dollar that could reverse the yuan's recent rally that had been"largely driven by the dollar's weakness".
The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 93.83, firmer than the previous day's 93.77.
The global US dollar index rose to 93.071 from the previous close of 93.043.
The offshore yuan was trading 0.09 per cent weaker than the onshore spot at 6.7326 per US dollar.
Offshore one-year non-deliverable forwards contracts (NDFs), considered the best available proxy for forward-looking market expectations of the yuan's value, traded at 6.852, 1.92 percent weaker than the midpoint.
One-year NDFs are settled against the midpoint, not the spot rate.