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China’s yuan weakened against the dollar on Friday after the central bank set a weaker midpoint rate and companies bought dollars, traders said.
“We see large demand for dollars by corporates while few banks sold dollars,’’ said a trader at a Chinese commercial bank in Shanghai.
The People’s Bank of China set the midpoint rate at 6.3655 per dollar prior to market open, 0.04 per cent weaker than the previous fix 6.3628. The spot market opened at 6.3690 per dollar and was changing hands at 6.3720 at midday, 0.04 per cent weaker than the previous close.
Despite the weaker yuan, traders say the central bank appears to have eased its intervention of late as large-scale dollar sales and yuan purchases have diminished.
The Chinese currency has been periodically supported by state-owned banks’ dollar sales on behalf of the central bank since the yuan’s surprise devaluation on Aug. 11. The offshore yuan was trading 0.38 per cent weaker than the onshore spot at 6.3965 per dollar.
New York Fed President William Dudley had said on Thursday that waiting for inflation to pick up before quickly tightening monetary policy heightens the risk of an economic hard landing.
The comments served to further underpin the dollar as markets prepare for the US Federal Reserve to raise rates next month, widely expected after last week’s strong jobs report. Reflecting a well-bid dollar, the offshore yuan was trading around 6.39 of late.
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