China's yuan closed down on Monday as the People's Bank of China set a lower mid-point in the wake of a rise in the US dollar index and demand for the safe haven US currency due to tensions on the Korean peninsula. But the PBOC's fixing changed so little that traders said it clearly indicated the central bank wants to keep the yuan stable in the near term, traders said.
The premium enjoyed by offshore yuan in Hong Kong against onshore yuan was steady at 60 pips by midday from 50 pips at Friday's close. But the spread has narrowed from a peak of 1,790 pips hit in mid-October, as the offshore market meshed its view with the onshore market - that the yuan would remain stable in the near term.
But with price pressures showing no signs of subsiding and a slew of political events coming up next year, starting with President Hu's visit to the US in January, analysts said the yuan's rise may accelerate. Spot yuan closed at 6.6745 versus the dollar, falling from Friday's close of 6.6555. It has risen 2.27 percent since the PBOC announced a depegging in mid-June. Offshore, one-year NDFs were bid at 6.5430, up slightly late on Monday from Friday's close of 6.5280. Their implied yuan appreciation in a year's time fell to 1.82 percent from 2.06 percent.
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