SHANGHAI: The yuan ended slightly stronger versus the dollar on Thursday after the People's Bank of China (PBOC) set its midpoint a touch higher and close to a key psychological level, indicating its intention not to allow significant depreciation.
Expectations of yuan depreciation had been growing in overseas markets, with offshore one-year non-deliverable forwards implying yuan depreciation of 0.58 percent by midday, unchanged from Wednesday's close.
"The central bank set the midpoint around 6.30, showing a clear signal that it wants the market to keep the yuan around this level," said a dealer at a Chinese bank in Shanghai. "(It wants) no appreciation and no deprecation."
Spot yuan was at 6.3185 against the dollar, inching up from Wednesday's close of 6.3229.
The central bank set the yuan fixing higher at 6.3004 from Wednesday's 6.3092, despite a 0.1 percent rise in the dollar index on Wednesday.
The PBOC typically strengthens its midpoint in response to a weaker greenback overnight, but has broken this pattern in the last two days.
"The 6.30 point is a key level for us. If the central bank breaks through this level, it would mean it wants to let the yuan rise further," said a dealer at a Chinese bank in Shenzhen. "But for now, it is keeping the midpoint stable, showing that it does not intend any big moves in the yuan."
Other Asian currencies were hit by Chinese PMI data, which showed the country's manufacturing activity shrank in March for a fifth-straight month, underscoring concerns about growth slowdown in the world's second largest economy.
Most analysts think the yuan still has potential to appreciate this year.
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