The yuan closed up slightly against the dollar on Thursday but still hit its lower daily trade limit for the seventh straight day as investors sold yuan amid strong dollar demand at the year-end. A reason the yuan has repeatedly hit the lower edge of the band is because of strong dollar demand from large companies and a shortage of dollars in the onshore market, dealers said.
Spot yuan closed at 6.3619 per dollar, higher than Wednesday's close of 6.3643, but hit limit down at 6.3636. The yuan has still risen 3.58 percent so far this year and 7.30 percent since it was depegged in June 2010. Before trading began, the PBOC fixed the day's mid-point at 6.3319, stronger than Wednesday's 6.3342. The central bank uses the fixing to express the government's intention for the yuan's daily movement.
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 6.3950 on Thursday against 6.3855 at the close on Wednesday, implying that the yuan would depreciate 0.99 percent in 12 months from Thursday's PBOC mid-point, compared with a 0.84 percent fall implied on Wednesday.
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