The yuan closed slightly lower against the dollar on Wednesday as investors closely watched the dollar's performance for clues on the Chinese currency's next moves, traders said. The People's Bank of China (PBOC) set a midpoint that was almost unchanged, in line with recent signs that Beijing hopes to keep the currency relatively stable despite pressure on exports from the global economic slowdown.
The yuan is likely to find a firm floor at 6.4 against the dollar for now but a sharp rise in the dollar index might prompt the Chinese central bank to guide the yuan lower at a measured pace, they said.
Spot yuan closed at 6.3686 per dollar, compared with Tuesday's close of 6.3659. The currency has recently persistently traded below the PBOC's midpoint, which is the base rate from which the PBOC allows the yuan to rise or fall 1 percent in a single day.
Before trade began, the central bank set the yuan's midpoint at 6.3209, marginally weaker than Tuesday's fix of 6.3195. The PBOC has mostly set the midpoint stronger than the 6.33 level since it widened the yuan's trading band to 1 percent from 0.5 percent in mid-April.
Offshore one-year non-deliverable yuan forward contracts changed hands at 6.4160 on Wednesday afternoon to imply yuan depreciation of 0.74 percent against the dollar in the next 12 months based on the spot yuan's midday rate.
Offshore spot yuan was trading around 6.3655 in late trade, roughly in line with the onshore spot level.
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