The yuan dipped against the dollar on Monday, guided by the Chinese central bank ahead of a visit to China by U.S. Treasury Secretary Henry Paulson, but its appreciation in the first quarter is set to be the biggest since the creation of China’s foreign exchange market in 1994.
“China typically guides the yuan slightly lower ahead of visits by key Western economic officials, to leave room for it to rise a bit faster during those visits,” said a dealer at a European bank in Shanghai.
“So we are not surprised to see the central bank set weaker yuan mid-points over the past two days. But the yuan is almost certain to breach the psychologically important 7.0000 level this week during Paulson’s visit.”
See here for more details on Paulson’s visit.