HONG KONG: China's yuan edged higher on Thursday but looked set for its second straight weekly loss against the dollar as an uncertain economic outlook prompts some investors to reduce their positions.
Spot yuan changed hands at 6.2327 per dollar, slightly above Wednesday's close of 6.2344. The People's Bank of China (PBOC) fixed the yuan midpoint at 6.1538, stronger than Wednesday's fixing of 6.1555.
On a weekly basis, the yuan is set to weaken by 0.1 percent against the dollar in June, a second consecutive weekly loss.
The renminbi has lost 2.7 percent against the dollar so far this year as the central bank flushed out speculators, becoming one the worst players among its emerging market peers, according to Thomson Reuters data.
While some analysts are optimistic the currency may reclaim some of its losses in the second half of the year as the government launches more targeted stimulus activity to shore up economic growth, the slack in the global economy is prompting some of them to turn more cautious.
Premier Li Keqiang said last week that China's economy would not suffer a hard landing and would continue to grow at a medium to high pace in the long term without strong stimulus.
The International Monetary Fund cut its growth forecast for the United States last week to 2 percent for 2014 from 2.8 percent it predicted in April.
Renewed weakness in the global economy led by the United States could prompt China to keep the currency weak to ensure exports remain competitive.
Credit Agricole economists expect gains in the yuan to be delayed if the global economic recovery doesn't proceed along expected lines as the central bank is using "external demand as a back-up for weakening domestic demand and currency depreciation is its tool in the process."
The bank expects the yuan to strengthen to 6 per dollar by end-2014.
Offshore yuan derivative markets are already sniffing more weakness. The gap between one-year non deliverable forwards and the spot rate has widened to near one-month highs, indicating yuan weakness bets are gathering steam in the offshore markets.
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