The yuan ended up against the dollar on Friday, brushing the lower end of its daily trading band in the morning although it pulled away slightly later, underlining strong market demand for the US currency. "Dollar liquidity is still quite tight in the market and companies and banks are showing rising demand for buying dollars and few would like to sell dollars at this time unless they have to do so," said a trader at a state bank in Shanghai.
Spot yuan closed at 6.3597 versus the dollar, stronger than Thursday's close of 6.3635. It has risen 3.62 percent so far this year and 7.34 percent since its depegging in June 2010. Before trading began, the PBOC fixed the day's mid-point at 6.3310, up from Thursday's 6.3353. The central bank uses the fixing to express the government's intention for the yuan's daily movement.
Benchmark offshore one-year dollar/yuan non-deliverable forwards (NDFs) have largely been forecasting yuan depreciation in a year's time since late September. One-year NDFs were bid at 6.3840 on Friday against 6.3820 at the close on Thursday, implying that the yuan would depreciate 0.83 percent in 12 months.
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