China's yuan fell against the U.S. dollar late Wednesday after the central bank guided the yuan lower in a daily reference rate setting, but the euro's strength provided support for the local unit.

On the over-the-counter market, the dollar was at CNY6.3000 around 0830 GMT, up from Tuesday's close of CNY6.2996. It traded in a range of CNY6.2981 to CNY6.3027.

The People's Bank of China set the dollar-yuan central parity rate at 6.2958, up from Tuesday's 6.2947, following the dollar's gains overseas. The ICE Dollar Index, which tracks the dollar against a trade-weighted basket of currencies, was at 79.388 from 78.946 late Tuesday in New York. At 0900 GMT, the dollar index was at 79.234.

A Shanghai-based foreign bank trader said the yuan's weak performance during Chinese Vice-President Xi Jinping's U.S. visit may indicate the attitude of China's next leadership. "They may want to say China's policies will be decided by China," he noted.

The yuan's downside was supported after the euro strengthened on China central bank Gov. Zhou Xiaochuan's statement that the PBOC would increase its holdings of euro-denominated assets.

At 0900 GMT, the euro was at $1.3161, up from $1.3130 late Tuesday in New York.

The yuan has risen 8.4% against the U.S. unit since June 2010, when China effectively ended its currency's two-year-long peg to the dollar and vowed to make the yuan more flexible.

Offshore, one-year dollar-yuan nondeliverable forward contracts fell to 6.2785/6.2815 from 6.2800/6.2850 late Tuesday, implying a 0.3% rise by the yuan against the dollar over the next year.

In the offshore yuan market in Hong Kong, where the Chinese currency floats freely, the dollar was at CNY6.2990 late Wednesday, down from CNY6.3015 late Tuesday.

Source:chinesestock