Yuan takes a breather on weaker central bank fixing

SHANGHAI - The yuan pulled back slightly against the dollar on Tuesday from a slew of recent record highs, as the People's Bank of China fixed a marginally weaker mid-point, signaling the central bank may stick to gradualism in reforming the country's currency regime.

The consolidation came after the yuan breezed past 6.50 a dollar last Friday, surpassing the psychologically important level for the first time and raising expectations that the currency will continue to strengthen quickly to battle stubbornly high inflation. Monday was a public holiday in China.

Traders said Tuesday's weaker PBOC fixing indicated again that the government may choose not to conduct drastic reforms, such as a one-off revaluation or to widen the trading band. It may opt to let the yuan rise gradually in line with global market conditions, such as the fluctuation in commodity prices.