The yuan closed up slightly against the dollar on Wednesday after the People's Bank of China set the mid-point moderately higher, possibly signalling that it wants to set a near-term floor for the yuan as it nears 6.36 per dollar, traders said. Spot yuan closed at 6.3590 per dollar, stronger than Tuesday's close of 6.3608. It has risen 3.63 percent so far this year and 7.35 percent since it was depegged from the dollar in June 2010.
Before trading began, the central bank set the mid-point at 6.3498, up from Tuesday's 6.3555. 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. Some offshore investors have been shorting the yuan since September as signs that the world's second-largest economy is slowing have raised the possibility of a hard landing, albeit the chance is slim, traders said.
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 landmark revaluation in July 2005. One-year NDFs were bid at 6.3670 on Wednesday, up slightly from 6.3650 at the close on Tuesday, implying that the yuan would fall 0.27 percent in 12 months from Wednesday's PBOC mid-point, compared with a 0.24 percent depreciation implied on Tuesday.
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