The yuan closed down slightly against the dollar on Thursday after the People's Bank of China set a weaker mid-point, while the dollar index also hit a fresh one-month high. Dealers said they expected the yuan could hover around recent levels for a while amid increasing worries about the eurozone crisis and a slowdown in the domestic economy.
Spot yuan closed at 6.3508 per dollar, down from Wednesday's close of 6.3456. It has still risen 3.76 percent so far this year and 7.49 percent since it was depegged from the dollar in June 2010. Before trading began, the central bank set the mid-point at 6.3553, compared with Wednesday's 6.3509. The authorities have set the mid-point below the level of 6.34 for the past two weeks.
Offshore one-year dollar/yuan non-deliverable forwards (NDFs) were bid at 6.3240, down from 6.3360 at the close on Wednesday. They now implied yuan appreciation of 0.49 percent in 12 months from the PBOC mid-point. Offshore dollar/yuan forwards typically forecast yuan appreciation over the past few years but in a rare case, it has implied yuan depreciation for most of the time since September's dollar rally in global markets.
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