China's currency closed at its highest against the dollar since the country on July 21 let the yuan appreciate for the first time in a decade.
The yuan closed at 8.1046 per dollar, from 8.1056 on July 29, according to the Web site of the People's Bank of China. The currency was fixed at the same level.
China wants "to allow the appreciation of the currency but in a very gradual manner," Dariusz Kowalczyk, senior investment strategist at CFC Securities Ltd, said in Hong Kong. "It will limit the pace of the gain and reduce volatility."
The central bank allowed the yuan to gain 2.1 percent to 8.11 against the dollar on July 21, ending the peg of 8.3 introduced in 1995. It sets the official fixing price of the yuan, which then becomes the mid-rate for trading on the next working day. The People's Bank of China allows a daily movement of 0.3 percent either side of the rate against the dollar.
The yuan closed at 9.8628 per euro, from 9.8221 on July 29, at 0.072266 against the yen, from 0.072327, and at 1.0422 versus the Hong Kong dollar, from 1.0423. The currency is allowed to fluctuate 1.5 percent either side of those closing rates.
Investors have been betting on further gains in the Chinese currency. The yuan would rise to 7.7625 against the dollar in a year if freely traded, a gain of 4.4 percent from today's closing price, according to forward contracts as of 4:22 p.m. in Hong Kong. The so-called implied rate was at 7.7575 late in Asia on Friday.
Such contracts allow investors to bet on the value of a currency that isn't fully convertible or hedge investments denominated in it.
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