The yuan edged down slightly on Thursday, as a stronger dollar elicited a weaker mid-point from the central bank. The central bank set its daily mid-point at 6.3230, 75 pips weaker than Wednesday, as the dollar index rose moderately overnight. Spot yuan followed the mid-point, closing at 6.3178, 23 pips weaker than Wednesday's close.
The recent close link between the dollar index and the yuan mid-point represents a holding pattern by the central bank, as it mulls over how to manage the exchange rate this year. The offshore non-deliverable forward market is also showing signs of uncertainty. The NDF curve has flattened significantly over the last month.
One-year NDFs implied 1.1 percent depreciation in a year's time on December 15. At late afternoon Thursday, they traded at 6.325, implying 0.07 percent depreciation. Offshore spot yuan is now at virtual parity with the onshore rate, after trading at a discount for more than three months beginning in mid-September.
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