China's yuan closed down slightly on Wednesday as the People's Bank of China set its mid-point a touch lower to mirror a rally in the US dollar index on Tuesday. But the PBOC's fixing changed so little that traders said it clearly indicated the central bank wants to keep the yuan stable in the near term, particularly amid Sino-US trade talks.
The premium enjoyed by offshore yuan in Hong Kong against onshore yuan was steady at 70 pips in late trade from 50 pips at Tuesday's close. But the spread has narrowed from a peak of 1,790 pips hit in mid-October, as the offshore market meshed its view with the onshore market - that the yuan would remain stable in the near term.
Spot yuan closed at 6.6555 versus the dollar, falling four pips from Tuesday's close of 6.6551. Before trade began, the PBOC set the day's mid-point at 6.6566, which was slightly weaker than Tuesday's 6.6531. The mid-point is a level from which the yuan may rise or fall 0.5 percent against the dollar on a given day. Offshore, one-year NDFs were bid at 6.5100 in late trade, up from Tuesday's close of 6.4960. Their implied yuan appreciation in a year's time fell to 2.25 percent from 2.47 percent, reflecting the dollar's global strengthening.
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