China's yuan moved a touch firmer against the dollar on Friday, shrugging off a stronger greenback that rose as investors turned to safer assets on worries the US could go over the looming "fiscal cliff". The yuan closed at 6.2286 per dollar, up 0.03 percent against Thursday's close of 6.2302.
The People's Bank of China marginally weakened its midpoint to 6.2881 from Thursday's 6.2877. The exchange rate is only allowed to diverge by 1 percent in either direction from the central bank's daily midpoint fix. Trading volume picked up in the afternoon to post a healthy $12.5 billion for the day, despite some traders saying clients were winding down activities for the year. The dollar index strengthened overnight, stemming a two-week downward trend, as funds flowed out of riskier assets and into the safe-haven currency on fiscal cliff uncertainty.
Offshore yuan (CNH), which is not subject to the Chinese central bank's daily trading range, narrowed the gap on the its onshore equivalent, but remained at a premium to the onshore market, suggesting it remains bullish over a yuan rise. But offshore forwards contracts are more bearish toward the currency. One-year non-deliverable forwards were quoted around 6.3210 per dollar on Friday, implying depreciation in the next 12 months.
The yuan has now risen more than 1 percent against the dollar this year and 2.6 percent since 2012's nadir in late July. The current rate is just 0.1 percent away from the record strong level of 6.2223, hit at the end of November.
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