The yuan ended up slightly against the dollar after trading narrowly on Wednesday, with the market waiting to see when the central bank might let the Chinese currency renew its cycle of appreciation. Spot yuan closed slightly firmer at 6.5713 versus the dollar against its previous close of 6.5727. The currency has risen 3.9 percent since it was depegged in June 2010.
Before trading began, the PBOC set the yuan's mid-point at 6.5718 versus the dollar, weaker than Tuesday's 6.5679. Traders expect the daily fixing to hit a new peak soon as Beijing appears to be using the yuan to help fight imported inflation propelled by high global commodity prices.
Late on Tuesday, the Bank for International Settlement showed that the yuan's nominal effective exchange rate, or its value against a trade-weighted basket, edged down 0.3 percent in February to 113.22, up from last month's 113.6.
Traders said the fall in the yuan's NEER in February was mainly driven by a weak dollar index in global markets, when it declined 1.1 percent. NEER is a currency's nominal exchange rate against a basket of trade-weight currencies. In the Chinese case, the dollar dominates in the basket by a weight of about 70 percent. Benchmark one-year dollar/yuan non-deliverable forwards (NDF) were bid at 6.4560, edging up from 6.4490 at Tuesday's close. Their implied yuan appreciation in a year's time fell to 1.8 percent, from Tuesday's 1.9 percent.
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