China's yuan was up against the U.S. dollar for a third straight day late Tuesday after the Chinese central bank guided its reference exchange rate for the dollar to a record low.
However, the yuan continued to face strong selling pressure, driven by bids for the safe-haven U.S. unit and because of a weaker yuan in the offshore Hong Kong market where the Chinese currency floats freely.
In the over-the-counter market, the dollar was at CNY6.3604 around 0830 GMT, down from CNY6.3754 late Monday. It traded at CNY6.3500 to CNY6.3651 during the day.
The yuan has risen about 7% against the U.S. unit since June 2010, when China unpegged its currency from the dollar.
The People's Bank of China fixed the dollar/yuan central parity rate at an all-time low of 6.3425 Tuesday, compared with Monday's 6.3549, after the euro advanced against the dollar overnight on rising optimism that euro-zone leaders may be near a deal to enhance the euro zone's bailout facility.
The previous record low of 6.3483 was set Oct. 11, immediately before the U.S. Senate voted to pass a currency bill targeting China.
"Corporate demand for dollars continues to be extremely strong, pushing the dollar higher (against the yuan)," a Shanghai-based trader at a foreign bank said.
For a third straight session, traders said they suspected the PBOC was supporting the yuan in the spot market by extending offers to sell dollars at CNY6.3605 via a little-used anonymous trading platform. Dealers believe the PBOC uses the anonymous system on occasion to signal its intentions to the market.
Offshore, the yuan rose against the dollar in both the non-deliverable forward contracts and spot markets. One-year dollar-yuan non-deliverable forward contracts fell to 6.3900/6.3970 from 6.4000/6.4070 late Monday, tracking the onshore market, and implying a 0.5% depreciation by the yuan against the U.S. currency over the next year.
In the offshore yuan market in Hong Kong, the dollar-yuan exchange rate was at CNY6.3990 late Tuesday, down from CNY6.4095 late Monday.