SHANGHAI - China's yuan pulled back slightly from a record high against the dollar on Thursday after the central bank fixed a weaker midpoint, following the currency's traditional year-end burst of appreciation.
Spot yuan touched an intraday high of 6.0507 per dollar on Thursday, narrowly off its all-time high of 6.0506 hit on Tuesday ahead of Wednesday's New Year's Day holiday.
It was trading at 6.0510 by midday, slightly up from 6.0539 at Tuesday's close.
The People's Bank of China (PBOC) set Thursday's midpoint at 6.0990, slightly weaker than Tuesday's 6.0969.
Before Thursday, the PBOC set its midpoint at the strongest level since the Chinese market was established in 1994 for three straight sessions. It typically guides the yuan higher at year end to meet an unofficial full-year appreciation target set at the beginning of the year.
"The year-end appreciation is over," said a dealer at a Chinese commercial bank in Shanghai.
"Even though there's still a possibility the yuan will stray briefly a few times to new record highs, the currency is likely to see firm resistance at 6.05 per cent in coming weeks.
"In the longer term, China is likely to continue see capital inflows including trade surplus, keeping the yuan under upward pressure for 2014."
Traders said they believe the yuan could appreciate as much as 3 per cent in 2014, compared with a 2.9-per cent rise in 2013, with the first-quarter pace relatively quick at around 1 per cent.
These predictions are based on a prospect that the world's second-economy will continue grow around 7.5 per cent in 2014, compared with a forecast 7.6 per cent in 2013, traders said.
But a manufacturing survey released on Thursday showed China's factory activity expanded at its slowest pace in three months in December.
The final HSBC/Markit manufacturing Purchasing Managers'Index (PMI) slipped to 50.5 in December from 50.8 in November, weighed down by shrinking export orders.