* PBOC tolerates yuan rise but no sign of intervention
* Potential for yuan to appreciate sharply limited
* Yuan also touches record intraday high of 6.2640/dollar
* But gains only 0.28 pct this week
By Lu Jianxin and Gabriel Wildau
SHANGHAI, Oct 12 The yuan crept to a new closing
high against the dollar on Friday for a second day after a
stronger fixing of the midpoint, but gains on the week were
moderate, suggesting the potential for further appreciation was
limited, traders said.
The People's Bank of China (PBOC) set the midpoint slightly
stronger for the second straight day in an indication that it
would tolerate mild yuan appreciation. But there was no evidence
that the central bank had intervened in trading to boost the
yuan's value, as some had speculated, traders said.
"Clients' dollar sales are the key factor for the yuan to
rise this week," said a dealer at a U.S. bank in Shanghai.
"It doesn't make sense for the PBOC to intervene in trading
to boost the yuan's value at a time when weak global economic
and market conditions are exerting pressure on China's exports."
Spot yuan closed at 6.2672 versus the dollar, the
highest close since China set up the domestic foreign exchange
market in 1994. The previous record close was set on Thursday at
The currency also hit an intraday high of 6.26 40 surpassing
Thursday's historical intraday high of 6.2761.
Dollars sold by Chinese companies have flooded in since
China's onshore market resumed trading on Monday after a
week-long holiday, an indication of capital inflows. But the
yuan's rise has remained moderate at only 0.2 8 pe r cent this
week, slightly less than the week before the holiday.
Since mid-September the yuan has reversed a trend of
depreciation seen earlier this year. The U.S. Federal Reserve's
launch of a third round of quantitative easing (QE3) has sparked
strong interest in riskier assets such as emerging market
currencies, while depressing the U.S. currency.
The PBOC had set a slew of midpoints weaker than the yuan's
trading levels since then, in what traders said was a sign that
the authorities were worried about the impact of a strong
currency on China's weakening exports.
On Friday, the PBOC set the yuan's midpoint at
6.3264 versus the dollar, slightly stronger than Thursday's
But Friday's midpoint was still much weaker than the yuan's
Judging from the current PBOC stance, several traders said
they believed the central bank would allow the yuan to rise no
more than 1 percent this year compared to end-2011. That would
put the yuan at 6.2322 by the end of the year.
Driven by QE3, the yuan has now risen 0.43 percent versus
the dollar so far this year, reversing a fall of 1.6 percent by
"The yuan's recent appreciation has been a rebound instead
of the establishment of a new round of solid rises," said a
trader at a major European bank in Shanghai.