×

Yuan Hits Post-Revaluation High, Guided by Central Bank

China's yuan rebounded against the U.S. dollar on Tuesday after retreating for four straight trading sessions, guided by the central bank setting a record-high mid-point.

Before the start of trade, the People's Bank of China fixed its daily mid-point at 7.5845 to the dollar, the highest mid-point since Beijing revalued the yuan and depegged it from the dollar in July 2005.

The mid-point also led the yuan back above the psychologically key 7.6000 to the dollar level, which it breached for the first time last week.

The yuan was at 7.5843 to the dollar after hitting a post-revaluation high of 7.5839 earlier in the session, up from Monday's finish of 7.6015.

Dealers attributed the yuan's rise in part to expectations of a rise in interest rates and pressure on the central bank to address excess liquidity in the economy.

"There are expectations that the central bank will hike interest rates this month to cool down the overheated economy, and the government needs to sort out the problem of excess liquidity, so they are sending out a signal on that," said a dealer at a major U.S. bank.

China has also come under pressure from trade partners, especially the United States, to let the yuan appreciate more quickly, charging that an undervalued currency gives Chinese exporters an unfair advantage.

Chinese trade data released on Tuesday morning showed a record monthly surplus in June of $26.91 billion, exceeding a forecast of $24 billion.

On July 3, the yuan broke the the key 7.6000 level for the first time and hit an intraday high of 7.5929, but it subsequently retreated in a technical pull-back.

One-year offshore non-deliverable forwards quoted the yuan at 7.2452/7.2502, indicating appreciation of 4.61 to 4.68 percent in a year's time from Tuesday's mid-point, down from 4.80 to 4.86 percent on Monday.