The yuan traded yesterday at the strongest level in over four months on speculation the US dollar will continue to weaken amid the Federal Reserve's easing policies.

 

The yuan gained 0.09 percent to 6.3038 per US dollar in Shanghai, the China Foreign Exchange Trade System showed. It briefly hit 6.2945, the strongest level since April 17.

 

The yuan has firmed up 0.7 percent against the greenback so far this month, paring its loss for the year to 0.2 percent, according to data complied by Bloomberg News.

 

"More clients are selling the US dollar for yuan recently as the quantitative easing moves in the US has paired the outlook of the greenback?s investment returns," said a trader who declined to be identified.

 

The People's Bank of China yesterday set the central parity rate at 6.3380 per US dollar, nearly flat from Wednesday's 6.3392. The yuan can trade within 1 percent on each side of the rate.

 

The yuan has been trading above the daily parity rate for seven consecutive days.

 

In Hong Kong, the yuan rose 0.08 percent to 6.3158. But the yuan's 12 month non-deliverable forwards, watched as a future indicator of the exchange rate, stood at 6.4160 per dollar on talk the yuan may depreciate in the offshore market.

 

DBS Bank said in a report yesterday that China may widen the yuan's trading band again by the end of this year to allow it greater flexibility.

 

The bank saw the yuan's exchange rate to fluctuate more in the next six months amid economic uncertainties, and greater flexibility of the yuan is essential in promoting its international use. 

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