The yuan ended little changed against the dollar on Wednesday but hit its lower daily trade limit for the sixth straight day as the market continued to sell the Chinese currency. The yuan can trade 0.5 percent in either direction from the central bank's mid-point daily and has repeatedly hit the lower edge of the band, suggesting that foreign investors were selling yuan for dollars due to the US currency's safe-haven appeal.
Spot yuan ended at 6.3643 and hit limit down at 6.3659 versus the dollar. Wednesday's close was only one pip lower than the previous close of 6.3642. The yuan has risen 3.54 percent so far this year and 7.26 percent since its depegging in June 2010. Before trading began, the PBOC fixed the day's mid-point at 6.3342, slightly firmer than Tuesday's 6.3334.
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 6.3860 on Wednesday against 6.3820 at the close on Tuesday, implying that the yuan would depreciate 0.82 percent in 12 months from Tuesday's PBOC mid-point, compared with a 0.75 percent fall implied on Tuesday.