SHANGHAI: The yuan was little changed against the dollar on Wednesday but hit its lower daily trade limit for the sixth straight day as the market continued to sell the Chinese currency.
The yuan can trade 0.5 percent in either direction from the central bank's mid-point daily and has repeatedly hit the lower edge of the band, suggesting that foreign investors were selling yuan for dollars due to the US currency's safe-haven appeal.
Some traders have reported a shortage of dollars onshore at a time of global market uncertainty from the euro zone debt crisis.
Spot yuan was at 6.3628 by midday and hit limit down at 6.3659 versus the dollar, lower than Tuesday's close of 6.3642. It has risen 3.57 percent so far this year and 7.28 percent since its depegging in June 2010.
Before trading began, the PBOC fixed the day's mid-point at 6.3342, slightly firmer than Tuesday's 6.3334.
"Trade is quiet during the year-end as the central bank has repeatedly shown its intention to let the yuan stay stable via its mid-point," said a dealer at a European Bank in Shanghai.
Dealers said the yuan had little potential to rise in the near term due to a weaker-than-expected outlook in China's exports, but depreciation was not a goal of the People's Bank of China.
Wang Shouwen, director of the ministry's foreign trade department, said on Wednesday that China would face a "severe export situation" in 2012 and China's annual rate of export growth slowed in November versus October.
Also, market players said the PBOC intended to halt the expectation of yuan depreciation after many foreign investors sold yuan in the domestic market on expectations the safe-haven dollar would firm amid the euro zone's debt crisis.
Benchmark offshore one-year dollar/yuan non-deliverable forwards (NDFs) have largely been forecasting yuan depreciation in a year's time since late September, reversing a trend of appreciation since the yuan's revaluation in July 2005.
One-year NDFs were bid at 6.3800 on Wednesday against 6.3820 at the close on Tuesday, implying that the yuan would depreciate 0.72 percent in 12 months from Tuesday's PBOC mid-point, compared with a 0.75 percent fall implied on Tuesday.
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