Tighter credit at year end in China; traders continue to sell yuan as arbitrage opportunity persists

Don't follow the headlines: China Yuan Up Late; Companies Raise Yuan Cash At Year End

On the over-the-counter market, the dollar was at CNY6.3192 around 0830 GMT, down from CNY6.3212 late Wednesday. It traded between CNY6.3173 and CNY6.3256. The People's Bank of China fixed the dollar/yuan central parity rate at 6.3157, up a tad from Thursday's 6.3146 on the back of a stronger dollar overseas.

Central bank raised parity, but the dollar traded stronger than parity all day.

Offshore, the yuan fell against the dollar in both the nondeliverable forward and spot markets amid strong dollar demand for year-end window dressing. One-year dollar-yuan nondeliverable forwards rose to 6.3960/6.4000 from 6.3870/6.3920 late Wednesday, implying a 1.2% fall in the yuan against the U.S. currency over the next year. In the offshore yuan market in Hong Kong, where the Chinese currency floats freely, the dollar-yuan exchange rate was at 6.3440 compared to 6.3305 late Wednesday.

And here's a look at 1-Week SHIBOR (Shanghai Interbank Offered Rate) over the past couple of weeks: