(Yicai Global) July 1 -- The Chinese yuan, which has gained over 1.2 percent against the US dollar in the first half, is likely to start steadying out now and could end the year close to an exchange rate of 6.5, The Paper reported today, citing a number of brokerages.

The yuan, which was trading at a spot rate of 6.4612 yesterday, could appreciate slightly in the next three months and then return to a rate of around 6.5 to the dollar by the end of the year, CITIC Securities said. New policy announcements due to be made by the US Federal Reserve next month could drive the dollar up temporarily, it added.

The redback is likely to end the year between 6.3 and 6.5 to the dollar, Shenwan Hongyuan Securities said. Quantititive easing tapering is expected to occur much earlier as the Fed was being hawkish last month, interrupting the yuan’s appreciation.

Yesterday China’s central bank weakened the central parity rate of the yuan against the greenback by 34 base points to 6.4601, ending three straight days of appreciation, according to the China Foreign Exchange Trade System. As a result, the spot exchange rate depreciated 37 points, a marked turnaround from the gain of 786 points in the six months ended June 30.

“The yuan exchange rate was very much tied to movements of the dollar in the first half,” another foreign exchange trader with a joint-stock bank said. Now, the yuan is showing no clear signs of appreciation or depreciation against the greenback and it depends on what the Fed will do, he added.

The suppression of consumption and investment by high industrial product inflation may become a potential risk point and is likely to extend two-way fluctuations of the yuan exchange rate this year, Hong Kong-based Shenwan Hongyuan added.

Editor: Kim Taylor