SHANGHAI--China's central bank guided the yuan surprisingly weaker
against the U.S. dollar Tuesday via the daily fixing rate, likely
triggered by the euro's decline but also perhaps hinting at an attempt
to keep the yuan from hitting the lower limit of its daily trading
band.
The People's Bank of the Republic of China set the dollar-yuan central
parity at 6.3339 Tuesday, sharply up from 6.3270 Monday and also much
higher than the 6.3300 expected by some traders.
"If the central parity is above 6.3320, it's too high compared with
our expectations," said a Shanghai-based trader with a foreign bank.
The euro's weakness overnight is certainly an important factor in the
higher dollar-yuan fixing, traders said, but the departure from market
consensus has triggered speculation that the central bank may be
guiding the yuan weaker in the hope that the market doesn't need to
push it to its daily downside limit again.
The yuan hit the lower end of its trading band against the dollar
Friday, the first time since the central bank in mid April doubled the
space the currency is allowed to move.
At 0227 GMT, the dollar traded at CNY6.3920, higher than Monday's
close of CNY6.3864. Its top-most level is CNY6.3972, or 1% above
central parity.
Write to Wynne Wang and Shen Hong at wynne.wang@dowjones.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
July 23, 2012 22:28 ET (02:28 GMT)
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