The yuan closed up marginally against the dollar on Thursday as the greenback gave back gains its made in early trade after the Federal Reserve refrained from monetary easing to stimulate a flagging US economy. The People's Bank of China (PBOC) set the yuan's mid-point, its base from which the currency can fall or rise a maximum 1 percent in a day, at its second-weakest level this year in a clear sign it will permit the yuan to depreciate slightly.
But dealers said the Chinese central bank also appeared to have added dollar liquidity to the market in a move aimed at preventing the yuan from excessive depreciation. Spot yuan closed at 6.3674 per dollar, slightly stronger than Wednesday's close of 6.3685. It was initially weaker against Wednesday's close at 6.3778 in the morning trade. Traders said they expected the yuan to move between 6.35 and 6.40 per dollar in the near term, citing a rough balance of dollar supply and demand at these levels.
Before trading began, the PBOC fixed the yuan's midpoint at 6.3392, weaker than Wednesday's 6.3305. On July 25 the bank set the midpoint at 6.3429. The yuan has generally weakened so far this year, dropping 1 .1 5 percent a s of Thursday's close. Offshore one-year dollar/yuan non-deliverable forwards were largely stable on Thursday, changing hands around 6.4260 in late afternoon trade, implying the yuan would fall 0.9 1 percent in 12 months from the midday spot yuan rate. Offshore spot yuan in Hong Kong traded at 6.3 77 0, s lightly weaker than the onshore spot rate.
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