The yuan closed down slightly against the dollar on Thursday after the Federal Reserve's signal it was making no change in its steps to support the economy helped lift the US currency. The Fed kept to its debt buyback programme and signalled it was less concerned about deflation, but also said inflation would remain subdued for some time and interest rates would stay low for an extended period.
The market's reaction to the meeting's outcome was much milder than previously expected. The US dollar index to rose slightly for a second day on Thursday, after tumbling more than 1 percent on Tuesday on investor worries that the Fed would damp expectations for higher interest rates.
"As the dollar rose overnight in response to the Fed's decision, China's central bank allowed the yuan to fall slightly today to guide the yuan in that direction," said a dealer at an Asian bank in Shanghai. Spot yuan finished at 6.8347 against the dollar, down from Wednesday's close of 6.8328, after the Chinese central bank fixed the yuan's daily mid-point at 6.8331, down slightly from Wednesday's 6.8316.
Despite no surprises from the Fed's meeting, worries about a depreciating US dollar lingered. A senior researcher with China's ruling Communist Party on Thursday said China should buy more gold because the dollar was poised for a fall and the metal was needed to support the greater international role envisaged for the yuan.
"The US is printing dollars on a massive scale, and in view of that trend, according to the laws of economics, there is no doubt that the dollar will fall," said Li Lianzhong, who heads the economic department of the Chinese Party's policy research office.
Offshore one-year dollar/yuan non-deliverable forwards (NDFs) fell to 6.7560 late on Thursday from Wednesday's close of 6.7600. Twelve-month yuan appreciation implied in the NDFs, which move inversely with the NDFs' levels, rose to 1.14 percent from the day's mid-point, up from 1.06 percent implied on Wednesday.