SHANGHAI: China's yuan edged down against the dollar on Thursday after the central bank fixed a slightly weaker midpoint but traders said the potential for any sharp correction was limited as Beijing appeared to want to keep the yuan largely stable for now.
Spot yuan was trading at 6.0546 per dollar at midday, falling 0.06 percent from 6.0512 at Wednesday's close, after the People's Bank of China (PBOC) set its midpoint at 6.1109, down 0.05 percent from Wednesday's 6.1079.
"Thursday's midpoint guides the yuan to weaken slightly," said a trader at a Chinese state-owned bank in Shanghai.
"But recent midpoints have only signalled that the government wants the yuan to remain stable, so the downside for the yuan will be limited."
Traders said the yuan was likely to move narrowly just below 6.05/dollar ahead of the Chinese Lunar New Year holiday, which falls on Jan. 31 and will last for a week.
In the longer term, however, many market watchers expect the yuan to gain around 3 percent over the course of 2014, similar to its 2.9-percent rise last year, mainly buoyed by continued capital inflows into China.
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