The Chinese yuan ended down against the dollar on Thursday after China's central bank set the mid-point at nearly a four-month high as the US dollar index hovered around one-year lows. Before trade began, the People's Bank of China set the yuan's daily mid-point at 6.8272 versus the dollar, the reference rate's highest level since May 25 and up from Wednesday's 6.8281. Spot yuan traded at 6.8265, slightly lower than Wednesday's close of 6.8258.
The dollar index fell slightly to 76.068 in early European trade, near a one-year low of 76.010. The index has shed more than 2 percent this month. "The stable yuan policy will not change in the near term, but dollar weakness may lead the (Chinese) central bank to set a slightly higher mid-point," said a dealer at an Asian bank in Shanghai.
Several dealers said they expected the yuan to move between 6.8200 and 6.8300 in the coming days. Offshore, benchmark one-year dollar/yuan non-deliverable forwards (NDFs) fell marginally to 6.7295 bid late on Thursday, compared with Wednesday's close of 6.7300. Twelve-month yuan appreciation implied by NDFs, which moves inversely with the forwards, fell slightly to 1.45 percent measured from the Chinese central bank's daily mid-point, compared with 1.46 percent implied at Wednesday's close. The NDFs' implied yuan appreciation has dropped sharply from a multi-month high around 2.5 percent in early June, hit by increasing signs that China is not likely to allow its currency to appreciate as uncertainties cloud its economic recovery.
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