SHANGHAI: China's yuan closed slightly lower against the dollar on Thursday following a busy afternoon session during which some bank clients settled foreign exchange positions before the end of the year.
The yuan ended at 6.2360 per dollar from Wednesday's close of 6.2353. Trading volume rose slightly to $13.93 billion from $12.46 billion on Wednesday.
While Thursday afternoon saw active trading, the market has generally been cautious this week. Deals have been largely been done by clients for year-end settlements.
The market was unlikely to return to normal trading conditions until the second week of January, traders said.
The domestic foreign exchange market will be closed for the New Year's Day holidays from Jan. 1 through Jan. 3, meaning the only trading days next week at Monday and Friday.
The People's Bank of China (PBOC) marginally weakened its midpoint to 6.2949 on Thursday from Wednesday's 6.2943. The exchange rate is allowed to diverge by only 1 percent in either direction from the central bank's daily midpoint.
The Chinese currency is up 0.93 percent versus the dollar this year. Most traders believe the yuan will end up around 1 percent for 2012.
Offshore one-year non-deliverable forwards were quoted at 6.3345, implying the yuan will depreciate over the next 12 months.
The offshore yuan changed hands at 6.2330. The CNH has been at a premium to the onshore spot since late November, but the spread has narrowed significantly as optimism about the yuan's future value moderated in the face of uncertainty over the US "fiscal cliff".
If the US cannot reach a budget deal, economists warn it could push the world's largest economy into recession, which would encourage investors to seek safe haven in dollar-denominated assets.
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