SHANGHAI (Dow Jones)--China's yuan rose to a fresh all-time high against the dollar late Friday after the central bank set the reference exchange rate at a record-low for a third straight day.
Dealers said, however, that they expect the People's Bank of China to let the yuan consolidate next week after its rapid run-up in recent sessions.
On the over-the-counter market, the dollar was at CNY6.4455 around 0830 GMT, down from CNY6.4516 late Thursday. It traded between CNY6.4455, the lowest since China's landmark currency reforms in 2005, and CNY6.4486.
At CNY6.4455 to the dollar, the yuan has risen 5.9% against the U.S. unit since June, when China effectively ended its currency's two-year peg to the dollar. It is up 0.27% this week, compared with last month's 0.22% increase.
The People's Bank of China fixed the dollar/yuan central parity rate at an all-time low for the third straight session after the euro surged overnight on plans for a new Greek bailout and an overhaul of the euro zone's rescue fund, which assuaged fears about possible contagion. Friday's parity was fixed at 6.4495 from Thursday's 6.4536.
"I think the market is still in a watch-and-wait mode as the trading volume is low. The feeling is the yuan has risen a lot this week and it's unclear how much more gains the PBOC has in store for the currency," a Beijing-based local bank trader said.
Dealers said the yuan's fast-paced gains this week were also likely spurred on by the sixth anniversary of China's currency reforms on July 21, 2005, when China abandoned a decade-old peg against the dollar amid market and political pressure. The PBOC also revalued the yuan overnight by 2.1% to 8.11 against the dollar at the time.
"We can't rule out a possible widening of the dollar/yuan trading band around this time, given the anniversary, although I think there is no need to expand the band for now," said a Shanghai-based trader from a foreign bank.
The market has been suspecting that the central bank could soon widen the daily trading limit to 1% above or below the central parity from the current 0.5%.
Offshore, the yuan rose against the dollar in both the nondeliverable forwards and spot markets, tracking a stronger yuan onshore. One-year dollar-yuan nondeliverable forwards fell to 6.3780/6.3810 from 6.3870/6.3910 late Thursday, implying a 1.3% rise by the yuan against the U.S. currency over the next year.
In the offshore yuan market in Hong Kong, where the Chinese currency floats freely, the dollar-yuan exchange rate was at 6.4455 late Friday, down from 6.4495 late Thursday.
-By Jean Yung, Dow Jones Newswires; 8621 6120-1200; jean.yung@dowjones.com
