The yuan closed up slightly against the dollar on Thursday as the People's Bank of China set a firmer mid-point after the dollar weakened, with dealers expecting the Chinese currency to trade in narrow ranges amid global market uncertainty. While the yuan is seen appreciating in the longer term, traders are likely to take a cautious approach for now.
Spot yuan closed at 6.3920 versus the dollar, stronger than Wednesday's close of 6.3964. It has risen 3.09 percent so far this year and 6.79 percent since its depegging in June 2010. Before trading began, the PBOC fixed the day's mid-point at 6.3878, stronger than Wednesday's 6.3945. The central bank uses the fixing to express the government's intention for the yuan's daily movements.
In the longer term, traders said the yuan was expected to strengthen as the government uses it to fight high inflation, reduce the economy's reliance on exports and raise the currency's global status. Offshore, one-year dollar/yuan non-deliverable forwards (NDFs) were bid at 6.3340 in late trade, down from Wednesday's close of 6.3430. Their implied yuan rise in a year's time rose to 0.84 percent from 0.70 percent.
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