Yuan ends up, mkt wary as slowing appreciation trend looms

SHANGHAI, Oct 17 (Reuters): The yuan closed up slightly against the dollar Monday after the Chinese central bank set a stronger mid-point, but traders said the market was still wary that the government may engineer a pause in yuan appreciation amid unstable global economic and market conditions. The People's Bank of China (PBoC) fixed its daily mid-point slightly stronger Monday after it set the fixing weaker for three straight days late last week after the US Senate approved a controversial bill aimed at forcing Beijing to push the yuan higher against the dollar. Chinese Vice Premier Li Keqiang late last Friday made Beijing's highest level public warning yet against the US Congress bill aimed at the yuan, telling former US Secretary of State Condoleezza Rice that the bill could hinder global recovery. And state media Saturday quoted Premier Wen Jiabao as telling businessmen that the yuan's exchange rate would remain stable to protect exporters. "It appears China is increasingly worried about the impact of the slowing global economy on its exports," said a trader at a Chinese state-owned bank in Beijing. "Adding to worries is the US politically-motivated yuan bill, so it won't be a surprise if China pauses yuan appreciation which has been seen for the bulk of this year." Spot yuan closed at 6.3706, up slightly from last Friday's close of 3.3785. It has now risen 3.44 per cent since the start of this year and 7.15 per cent since it was depegged from the dollar in June 2010. Before trading began, the PBOC set the mid-point of the day at 6.3710 compared with Friday's 6.3762. The central bank uses the reference rate to signal the government's intentions for the yuan, which could rise or fall 0.5 per cent from the mid-point in a day. China has mostly let the yuan appreciate steadily this year partly to help in its battle against imported inflation. But more recently since May, global commodity prices have fallen sharply amid a rally in the US dollar. While the Chinese government paints a picture of resisting US calls for a stronger yuan, it has made political concessions when tensions escalated in the past. More typically, Beijing has let the yuan appreciate intermittently ahead of major political events such as the meeting of the two nations' leaders and publication of the US Treasury's currency reports typically in April and October. The Treasury Department said last Friday it would delay until later this year a ruling on whether China is manipulating its currency as Democratic Party lawmakers tried to overcome Republican opposition to the bill targeted at the yuan. The sixth semiannual report to Congress under the Obama administration was originally due Saturday. Offshore, one-year dollaryuan non-deliverable forwards (NDFs) were bid at 6.3760 in late trade, falling from 6.3900 at the close last Friday. They implied yuan depreciation of 0.08 per cent in 12 months from Monday's PBoC mid-point, compared with depreciation of 0.30 per cent they implied last Friday.