Spot yuan prices closed up on Tuesday in reaction to a steadily weakening dollar, and after the Chinese central bank set the reference rate higher than the previous day. The People's Bank of China (PBOC) set the yuan midpoint fixing at 6.3332 per dollar, up slightly from Monday's close. Spot prices also opened up slightly but traded in a tight range as they have since Friday, closing at 6.3664.
The PBOC set the yuan midpoint near its 2012 low on Friday, which traders told Reuters was a signal that the bank will allow the yuan exchange rate to rise above 6.4 per dollar, previously considered the weakest rate the government would tolerate. Spot prices are down 1.3 percent against the dollar this year and traders now believe further depreciation of 1 percent by year-end is possible.
Offshore yuan markets remained stable. Non-deliverable forward contracts with a 1-year tenor in Hong Kong traded at 6.4255 at close, 0.8 percent weaker than the spot price. The intra-day rate for offshore yuan (CNH) moved to erase a brief gap that opened up over the last two days, returning to close near the spot price at 6.3740.
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