China's yuan was up against the U.S. dollar late Friday after the central bank guided its currency higher via the daily reference rate.
On the over-the-counter market, the dollar was at CNY6.2978 around 0830 GMT, down from Thursday's close of CNY6.2985. It traded in a CNY6.2940-CNY6.2998 range.
However, a Beijing-based trader at a local bank said the yuan's upside was capped by the central parity failing to fully reflect the euro's strength late Thursday.
The People's Bank of China set the dollar-yuan central parity rate at 6.2965, down from Thursday's 6.3031, following the dollar's weakness against the euro. The bloc currency hit $1.3379 overnight, its highest point since Dec. 12. At 0843 GMT, the euro was at $1.3385.
The yuan may level out over the next 12-18 months if the U.S. dollar remains stable and the European debt crisis doesn't worsen, the state-run China Securities Journal reported Friday, citing Li Daokui, an adviser to the country's central bank.
His comments come after China's foreign-exchange regulator Thursday said the market views the yuan as a "risk currency" rather than a safe-haven vehicle, signaling that perceptions of continued appreciation of the yuan need to be revised.
The yuan has risen 8.4% against the U.S. unit since June 2010, when China effectively ended its currency's two-year-long peg to the dollar and vowed to make the yuan more flexible. However, the Chinese unit is down 0.1% against the dollar so far this year.
Offshore, one-year dollar-yuan nondeliverable forwards fell to 6.2785/6.2835 from 6.2800/6.2850 late Thursday, and implying a 0.3% rise by the yuan against the dollar over the next year.
In the offshore yuan market in Hong Kong, where the Chinese currency floats freely, the dollar was at CNY6.2965 down from CNY6.3000 late Thursday.
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