The yuan closed almost unchanged against the dollar on Wednesday after the People's Bank of China fixed a slightly weaker mid-point that sent a signal that the government hopes to keep the yuan stable in the near term. The PBOC guided the yuan back slightly this week after letting it hit a record high last Friday, in what the market viewed as a goodwill gesture ahead of Chinese leader-in-waiting Xi Jinping's visit to the United States this week.
With the peak of Xi's visit being over now after he met with US President Barack Obama in Washington on Tuesday, dealers widely expect the yuan to move narrowly around 6.3 against the dollar for the rest of the first quarter as global economic weakness affects China's economic performance.
"I don't think the yuan has much room to appreciate despite the US pressure: the two sides have played a cat-and-mouse game for many years on the currency," said a trader at a US bank in Shanghai. Spot yuan closed at 6.3000 versus the dollar, compared with Tuesday's close of 6.2996 after the PBOC set the yuan's mid-point slightly weaker at 6.2958 against Tuesday's 6.2947. The PBOC set the mid-point at an all-time high of 6.2937 per dollar last Friday, guiding the yuan up to a record high of 6.2884 on the same day.
But traders said the record high mid-point was too near resistance at 6.30, indicating the central bank has no intention of letting the yuan breach that barrier decisively for now. In the offshore non-deliverable forward (NDF) market, one-year NDFs implied yuan appreciation of 0.31 percent on Wednesday afternoon, virtually unchanged from 0.25 percent implied on Tuesday.