SHANGHAI: The yuan closed slightly lower against the dollar on Friday after the People's Bank of China set the mid-point marginally higher, showing its intention to keep the Chinese currency stable for a while.
Dealers said the Chinese central bank could let the yuan move in a small range mainly from 6.34 to 6.36 next week.
"The central bank has repeatedly sent a strong signal that it will not let the yuan rise fast. The mid-point indicates such an intention," said a dealer at a Chinese bank in Shanghai.
China is facing renewed pressure from the United States after President Barack Obama turned up the heat on China's exchange rate policies.
But Chinese President Hu Jintao noted that US trade and employment problems would not be solved by even a major appreciation of the yuan.
Spot yuan closed at 6.3554 per dollar, down from Thursday's close of 6.3508. It has still risen 3.69 percent so far this year and 7.41 percent since it was depegged from the dollar in June 2010.
Before trading began, the central bank set the mid-point at 6.3548, compared with Thursday's 6.3553.
China let the yuan rise 0.49 percent versus the dollar last month, while its real value against a trade-weighted basket also rose in October, according to the latest data published by the Bank for International Settlements (BIS) late on Thursday.
The BIS index for the yuan's real effective exchange rate (REER), or the currency's value against the basket after adjustments based on inflation, rose to 126.42 points in October from 125.11 in September, up 1.05 percent.
The yuan's nominal effective exchange rate (NEER), its value before inflation adjustments, also rose to 116.89 from 115.58, up 1.13 percent in October.
Traders said a rise in major Asian currencies was a key reason for the rise in the yuan's NEER and REER.
Offshore one-year dollar/yuan non-deliverable forwards (NDFs) were bid at 6.3330 on Friday, up from 6.3280 at the close on Thursday.
They now implied that the yuan would appreciate 0.34 percent in 12 months from Friday's PBOC mid-point compared with an implied appreciation of 0.42 percent at Thursday's close.
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