The yuan ended virtually flat against the dollar on Tuesday after the Chinese central bank set a stable yuan mid-point, while dealers said year-end client demand for dollars kept the yuan's exchange rate below the central bank's reference rate. Spot yuan closed at 6.8294 per dollar on Tuesday, marginally firmer than Monday's close of 6.8300.
Spot yuan moved in a range of 6.8284 to 6.8321, trading below the central bank's daily yuan/dollar mid-point of 6.8282, which was barely changed from Monday's 6.8283. "We saw a rise in demand for dollars today," said a dealer at a state-owned bank in Shanghai. "But such demand won't have an impact on the long-term yuan trend."
Several dealers expected the central bank would stick to its stable yuan policy in the first quarter of 2010. "Basically, the yuan may not rise much in 2010," Liu Dongliang, currency strategist at China Merchants Bank in Shenzhen, said in a weekly report.
"The yuan may remain stable in 2010 as China needs to protect its exports and economic recovery." He said that, even if there were some adjustments to the yuan's exchange rate in 2010, the amount of appreciation would be limited between 1 and 2 percent. Offshore, benchmark one-year dollar/yuan non-deliverable forwards (NDFs) edged higher to 6.6630 bid late on Tuesday versus Monday's close of 6.6540. Twelve-month yuan appreciation implied by the NDFs fell slightly to 2.48 percent, when measured from the Chinese central bank's daily mid-point, from 2.62 percent implied on Monday.
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