Traders' sentiment cools on yuan appreciation

The yuan closed down against the dollar for the second day in a row on Wednesday as traders continued to cut their predictions on appreciation in the Chinese currency, Bloomberg reported. China’s currency fell 0.05% to 6.8434 against dollar, from 6.8397 the previous day, according to the China Foreign Exchange Trade System. The fall was tied to speculation that cheaper crude oil will shore up economic growth in the US. This led to a host of currencies – several of which are in the currency basket used to manage the yuan’s exchange rate – falling against the dollar. In a sign that appetites for the one-way bet on yuan appreciation may be easing, traders of yuan forward contracts inside China are more bullish than those outside for the first time in over two years. Non-deliverable forwards contracts traded in Shanghai indicate an expected 1.4% rise in the yuan to 6.7516 against the dollar in the next 12 months. Offshore contracts were predicting the yuan to reach 6.4005 against the dollar on July 18 and have since weakened.