The yuan ended little changed against the dollar on Friday even though the People's Bank of China set a weaker mid-point, underscoring the market's view the yuan will likely not fall much. Dealers said the yuan is expected to move in a small range in the near term, as the central bank prefers to keep the yuan stable for now.
China's central bank chief Zhou Xiaochuan said at an annual press conference on Friday that China would keep the yuan's exchange rate basically stable at a reasonable and balanced level. "Regarding the exchange rate policy, it's still the same line. Based on market supply and demand, we refer to a basket of currencies in making adjustments and will keep the renminbi exchange rate basically stable at a reasonable and balanced level," Zhou said.
Spot yuan inched firmer by only 1 pip to 6.5746 versus the dollar, against Thursday's close of 6.5747. The currency has risen 3.8 percent since it was depegged in June 2010. Before trading began, the PBOC fixed the yuan's mid-point at 6.5750 against dollar, weaker than Thursday's 6.5713. Benchmark one-year dollar/yuan non-deliverable forwards (NDF) were bid at 6.4410, up from 6.4370 at Thursday's close. Their implied yuan appreciation in a year's time fell to 2.1 percent.
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