The yuan closed lower against the US dollar on Monday after the People's Bank of China set the mid-point moderately weaker to reflect a US Dollar Index rally over the weekend. The domestic market, the China Foreign Exchange Trade System (CFETS), launched yuan trade against the Australian dollar and Canadian dollar on Monday, the latest currency pairs to be introduced as part of Beijing's efforts to promote the use of its currency.
Spot yuan closed at 6.3841 per dollar, weaker than Friday's close of 6.3750. It has still risen 3.22 percent so far this year and 6.93 percent since it was depegged from the dollar in June 2010. Before trading began, the central bank set the mid-point at 6.3585, down from Friday's 6.3554. The central bank appears to have halted the yuan's appreciation since early November, when the mid-point hit a record high of 6.3165. 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 6.4110 on Monday, edging up from 6.4060 at the close on Friday, implying that the yuan would depreciate 0.82 percent in 12 months from Monday's PBOC mid-point, compared with a 0.74 percent fall implied on Friday. The yuan was trading at 6.1550 to the Canadian dollar in late trade on its first day of trade, after the PBOC set the yuan/Canadian dollar's mid-point at 6.1048. It was trading at 6.3087 against the Australian dollar in late trade, also slightly weaker compared with the PBOC's fixing of 6.2491.