SHANGHAI: The yuan ended a touch higher against the dollar on Friday, buoyed by client dollar sales late in the session, traders said.
But the currency fell slightly this week as the market's attention shifted to the possibility of a dollar rally in global markets amid the euro zone's economic and political troubles, traders said.
The dollar index, in which the euro has a nearly 60 percent weighting, touched its highest level since mid-March of 80.336 in Asian trade on Friday, while worries lingered that the euro zone's conditions could worsen.
Spot yuan ended at 6.3106 per dollar, edging higher from Thursday's close but inching down from 6.3062 at the close of last week.
Trading was not immediately affected by a slew of data pointing to a continuation of a slowdown in the world's second-largest economy, trader said.
China reported on Friday that consumer prices in April rose 3.4 percent year-on-year, a touch above the 3.3 percent rise forecast in a Reuters poll but down from the 3.6 percent pace logged in March. Producer prices fell 0.7 percent on year, data showed.
Industrial output expanded at its slowest annual pace in nearly three years, fixed asset investment growth dipped to its lowest in almost a decade, while money supply and new lending figures were both weaker than expected, data showed.
These figures came after disappointing trade numbers on Thursday.
"The weakening of China data, adding to the uncertainty in global conditions, is expected to keep EM Asia FX under pressure," said Wee-Khoon Chong, a fixed income strategist at Societe Generale in Hong Kong.
PBOC SIGNALS STABILITY
In what traders believe to be a response to domestic and global weaknesses, the People's Bank of China (PBOC) recently set a slew of midpoints stronger than the yuan's trading level, signalling that it does not want the yuan to depreciate sharply.
The central bank fixed the midpoint at 6.2952 on Friday, only marginally weaker than Thursday's 6.2941. The midpoint is the PBOC's base rate from which the yuan can rise or fall 1 percent in a day.
"A relatively strong midpoint has been a stabilising factor for the yuan in recent weeks," said a trader at a Chinese commercial bank in Shanghai.
"However, jitters over what will happen in the euro zone and its impact on the dollar's performance in global markets loom large in the market."
China's GDP growth dropped to a near three-year low of 8.1 percent in the first quarter, and it recorded a rare trade deficit in February.
Economic uncertainty at home, combined with political and economic instability in the euro zone, have rattled investor confidence in the yuan, traders said.
Traders are increasingly doubting whether the yuan can still rise 2 or 3 percent this year as previously thought at the beginning of 2012, although many have not yet adjusted their forecasts for the Chinese currency's performance this year.
The yuan is expected to move inside a narrow range, with a floor seen at 6.33 next week, traders said.
Offshore one-year non-deliverable yuan forward contracts continued to trade at a discount to the spot price, changing hands at 6.3560 in the afternoon session for a discount of 0.96 percent to Friday's midpoint.
The offshore spot yuan price was at 6.3140 in late trade, largely following the trend in the onshore spot market.
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