China's yuan edged down against the dollar on Wednesday as market sentiment remained weak as the year winds down. The People's Bank of China set the midpoint rate at 6.9495 per dollar prior to the market opening, weaker than the previous fix of 6.9462. The spot market opened at 6.9500 per dollar and was changing hands at 6.9549 at midday, only 9 pips weaker than the previous late session close and 0.08 percent softer than the midpoint.

In Hong Kong, the overnight yuan borrowing rate jumped to 15.18333 percent on Wednesday, its highest level since September 19. Some traders said the surge was due to year-end seasonal factors and recent tightening measures by mainland authorities to stem capital outflows. The offshore yuan was trading 0.02 percent weaker than the onshore spot at 6.9535 per dollar. The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 96.06, firmer than the previous day's 96.03. The global dollar index fell to 102.97 from the previous close of 103.02.

Offshore one-year non-deliverable forwards contracts (NDFs), considered the best available proxy for forward-looking market expectations of the yuan's value, traded at 7.274, or 4.46 percent weaker than the midpoint. One-year NDFs are settled against the midpoint, not the spot rate. "The overall market was calm. Some market participants were liquidating their positions at the year-end while some were purchasing some dollars and getting prepared for a new year," said a trader at a Chinese bank in Shanghai.

Copyright Reuters, 2016