The yuan closed nearly flat on Tuesday, as apparent central bank intervention fuelled a revival of demand that kept the exchange rate consistently clear of its top-side limit for the first day in more than a month. Major state-owned banks were seen bidding for dollars aggressively, in a pattern that traders usually interpret as a sign that the People's Bank of China (PBOC) is active in the market.

That pulled spot yuan to close softer at 6.2460, little changed from Monday's close of 6.2451 but weaker than its midday level of 6.2324. Late Monday afternoon, the People's Bank of China (PBOC) apparently stepped in to act as dollar-buyer of last resort and jumpstart trading, after the yuan had remained at the strongest level permitted by the official daily trading range almost all day, amid sickly trading volumes.

The yuan briefly touched 6.2277 on Tuesday morning, near the strongest level permitted by the central bank, but in a departure from the pattern established over the last month, it did not remain glued to that limit. But trades involving the PBOC are generally invisible to the rest of the market. The PBOC set its midpoint at 6.2906 on Tuesday, slightly firmer than Monday's fix of 6.2922. The spot rate is allowed to diverge by no more than 1 percent from the midpoint the central bank sets each morning. The yuan has now gained 0.8 percent in 2012 and 2.4 percent since hitting its 2012-low of 6.3967 in late July.

Copyright Reuters, 2012