SHANGHAI (Dow Jones)--China's yuan was steady against the U.S. dollar Tuesday, but one-year dollar-yuan nondeliverable forwards fell to a more than three-week low because of renewed speculation the Chinese currency will resume its appreciation, after the U.S. Treasury decided at the weekend to delay whether to label China a currency manipulator.
On the onshore over-the-counter market, the dollar was at CNY6.8258 around 0930 GMT, barely changed from Friday's close of CNY6.8256. It traded between CNY6.8256 and CNY6.8260. China's financial markets were closed Monday for the Tomb Sweeping holiday.
One-year dollar-yuan NDFs, however, were at 6.6311/6.6361, their lowest since 6.6250/6.6290 on March 12 and down from 6.6455/6.6485 late Friday.
Onshore, the People's Bank of China set the session's central parity rate at 6.8260, unchanged from Friday, though this was its lowest level in more than 10 months and below the level of 6.8261-6.8262 that some traders had anticipated given the dollar's strength overnight after strong U.S. jobs data.
Dollar-yuan NDFs fell sharply in Asian trading, after U.S. Treasury Secretary Timothy Geithner said Saturday the U.S. Treasury would delay its semi-annual report to Congress on the currency policies of major trading partners. The report was originally due for issue April 15.
A number of U.S. lawmakers have been urging the Obama administration to label China a currency manipulator in the report.
"The lower NDFs are most likely because investors think the (report) delay could help ease tensions between the U.S. and China over the value of the yuan, as it gives China room to let the currency appreciate according to its own plan," said a Shanghai-based trader at a foreign bank.
Another Shanghai-based trader at a foreign bank said expectations of yuan appreciation have risen over the past few days.
"Some large global investment banks that had been conservative about the yuan appreciation issue have become more aggressive in selling the dollar in the NDF market since late last week," he said.
A Shanghai-based trader at a local bank said the U.S. Treasury's delay of the currency report appears to be a friendly, face-saving gesture toward China.
"Typically when the U.S. government does that, China will reward it with some friendly gesture as well," the trader said.
Another Shanghai-based trader at a local bank said, "the yuan appreciation trend seems to have begun," referring to the yuan's small yet steady gains this year.
But he added any larger yuan moves aren't likely to occur until May, after the China-U.S. Strategic and Economic Dialogue in Beijing in May.
