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DJ China Yuan Flat; Tight Liquidity Offsets PBOC Guidance
December 20, 2013

Vs Parity Previous USD/CNY Central Parity 6.1196 6.1183 USD/CNY OTC 0830 GMT 6.0713 -0.79% 6.0713 High 6.0764 -0.71% Low 6.0707 -0.80% SHANGHAI--China's yuan ended flat against the U.S. dollar Friday as rising demand for the Chinese currency amid a liquidity squeeze offset the central bank's efforts to guide the yuan weaker via a daily reference rate. On the over-the-counter market, the dollar was at CNY6.0713 around 0830 GMT, unchanged from Thursday's close. It traded in a range of CNY6.0707 to CNY6.0764. China's funding costs surged late this week as demand for cash rose during the holiday season. The benchmark weighted average of the seven-day repurchase agreement rate, a measure of short-term funding costs, rose to 7.75% this morning--the highest level since June 21. "Banking clients would tend to change their dollar into the yuan when they have limited access to yuan funding," said a Shanghai-based local bank trader. The yuan has risen 2.6% since the start of 2013. Traders said they expect the yuan to extend its gains next year. The People's Bank of China set the dollar/yuan central parity rate at 6.1196, higher than Thursday's 6.1183, tracking the dollar's broad gains overseas. Offshore, one-year dollar/yuan nondeliverable forward contracts rose to 6.1385/6.1425 from 6.1376/6.1416 late Thursday, implying a 1.1% fall by the yuan over the next year. In the offshore yuan market in Hong Kong, where the Chinese currency floats freely, the dollar was at CNY6.0720, lower than CNY6.0728 late Thursday. Write to Wynne Wang at