SHANGHAI: The yuan held steady against the dollar on Thursday after the People's Bank of China set a slightly lower mid-point, underscoring the central bank's intentions to keep the Chinese currency boxed in a narrow range in the near-term.
The yuan could move around 6.33 to 6.35 per dollar, a level it had traded at after the central bank tried to cool depreciation speculation amid signs of a slowing economy and capital outflows.
"The yuan is expected to steady and not fluctuate as much. It is unlikely to strike its daily limit," said a dealer at a Chinese bank in Shanghai.
The PBOC fixed its daily mid-point on Thursday at a relatively firm level around 6.32, although the dollar index returned to around 80 against a basket of currencies.
Spot yuan was at 6.3387 against the dollar, unchanged from Wednesday's close.
The yuan has risen 3.96 percent so far this year and 7.69 percent since it was depegged in June 2010.
Before trading began, the PBOC fixed the day's mid-point at 6.3253 only 5 pips lower than Wednesday's 6.3248. 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 6.3880 against the previous close of 6.3830, implying that the yuan would depreciate 0.99 percent in 12 months from the PBOC's mid-point, compared with a 0.91 percent fall implied on Wednesday.
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