The yuan closed slightly lower against the dollar on Friday, ignoring a rally in the euro that weakened the dollar in global markets, and traders said the yuan has little potential to appreciate given the sharp slowdown of China's economic growth. "Sentiment towards the yuan's future value (against the dollar) remains cautious," said a trader at a European bank in Shanghai.
"Our clients were selling the yuan around 6.34, and that helped offset a stronger yuan midpoint versus the dollar." Reflecting an overnight weakening of the dollar index in global markets, the People's Bank of China (PBOC) let the yuan rise slightly by setting its daily midpoint at 6.3412 up from Thursday's 6.3439.
It also permitted the yuan to soften versus the euro, setting the offical euro/yuan midpoint at 8.0105, weaker than Thursday's 7.9936, the first time that the central bank has let the yuan weaken below 8 per euro since mid-June. Spot yuan closed at 6.3430 to the dollar, slightly weaker than Thursday's close of 6.3428.
It ended at 8.0408 against the euro, largely in line with the PBOC's midpoint and down from Thursday's 8.0074. Underscoring expectations for yuan stability in the near term, onshore dollar/yuan forwards have failed to make gains after climbing to near 6.50 about three weeks ago.
One-year onshore dollar/yuan forwards were bid at 6.4660 in late trade, implying the yuan could depreciate 1.9 percent in the next 12 months but off from as much as 2.2 percent they implied on August 20. China's second-quarter economic growth slowed to its weakest in three years while exports in July grew just 1 percent from a year earlier, a huge retreat from the 11 percent growth posted in June.