Yuan strengthens before Chinese New Year

PBoC might have tighten its grip on Yuan today, last official day of trading in China before week long holiday begins on Monday.  Due to New Year China will remain closed for the week and most travel home during this time. So today is PBoC's last chance to tighten grip on Yuan. In recent days, PBoC has also flushed the banks with surplus cash, so that rates could remain in control, in spite increased demand.

Recent weakness in Dollar has also made the task easy for People's Bank of China (PBoC) to reign over Yuan weakness. Central parity, known as the fix has been set at 6.5314 today. Onshore Yuan is allowed to trade within 2% band of this central parity.

Chinese stock market is relatively calm today, down just 0.3%, trading at 2770.

Next week could prove relatively calmer with China closed. Financial markets could even focus to other issues than China. Metal market usually experiences lesser volatility during Chinese holiday.

However once piece of key docket from China would be released on Sunday and that is FX reserve for January.

Focus for next week will be European and UK GDP and FED chair Janet Yellen's testifying before congress.

Yuan is currently trading at 6.554 per Dollar in onshore market and 6.578 in offshore.