The yuan closed slightly lower against the dollar on Friday after the Chinese central bank fixed the yuan's midpoint near its 2012 low, signalling that it will allow the Chinese currency to fall below the key 6.40/dollar level, traders said. The People's Bank of China (PBOC) had defended the 6.40 level as recently as two weeks ago, but traders said it appears to have changed its stance, managing further depreciation of the currency to help counter sharply slowing economic growth.
The yuan last traded below 6.40 per US dollar in September last year. It appreciated through that level before steadying in the first quarter of 2012 and starting its recent depreciation. Spot yuan closed at 6.3727 per dollar, slightly weaker than Thursday's close of 6.3674. Before trading began, the PBOC set its midpoint at 6.3421 against the dollar, near its 2012 low of 6.3429 fixed on July 25 and weaker than Thursday's fixing of 6.3391.
Offshore one-year dollar/yuan non-deliverable forwards were largely stable on Friday, changing hands around 6.4270 in late afternoon trade, implying the yuan would fall 0.84 percent in 12 months from the closing spot yuan rate. Offshore spot yuan in Hong Kong traded at 6.3811, slightly weaker than the onshore spot rate.