The yuan ended Friday slightly higher against the dollar, but marked its first quarterly decline since the fourth quarter of 2009, slipping 0.06 percent. Traders expect the PBOC to permit more volatility for the yuan/dollar exchange rate in the second quarter, taking advantage of China's slowing exports and a rare trade deficit in February to experiment with widening the trading range.
Spot yuan closed at 6.2980 versus the dollar, slightly stronger than Thursday's close of 6.3060. The PBOC set its mid-point at 6.2943, weaker than Thursday's 6.2932, its third straight day of weak fixing. The mid-point fixing is the base rate used by the central bank to flag the government's intentions for the yuan's value, and from which the yuan is allowed rise or fall 0.5 percent in the course of a day.
In the first half of March, the PBOC let the yuan's mid-point fixing weaken 0.70 percent against the dollar, its biggest 11-session loss since the China Foreign Exchange Trade System, the domestic market, was set up in 1994. Over the following eight sessions to Tuesday, the yuan's mid-point value rose 0.82 percent, the biggest eight-session gain since October 2010. The PBOC set the midpoint at a record high for three sessions from last Friday to Tuesday. The yuan fell 0.58 percent in the first half of March and rose only 0.36 percent in the subsequent eight sessions.
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