The yuan ended down slightly against the dollar on Monday after the People's Bank of China set a weaker midpoint, even though the dollar index hit a nearly three-month low, underscoring the central bank's resolve to restrain sharp gains in the yuan.
The US dollar index appears to have lost its momentum since it hit a recent peak of 81.784 in mid-January, falling 0.6 percent on Friday. "We're really surprised about the fixing," said a dealer at a Chinese commercial bank in Shanghai. "It seems like the central bank intends to keep the yuan in a narrow range." Spot yuan closed at 6.3019 against the dollar, edging down from Friday's close of 6.2978.
The central bank fixed its midpoint at 6.2985 on Monday compared with 6.2965 on Friday. It had set the fixing in a narrow range after letting it hit an all-time high of 6.2937 per dollar on February 10, which markets construed as a goodwill gesture to the United States ahead of Chinese leader-in-waiting Xi Jinping's visit to that country earlier this month. In the offshore non-deliverable forwards (NDF) market, the benchmark one-year NDFs implied yuan appreciation of 0.28 percent late on Monday, falling slightly from 0.31 percent they implied at Friday's close.