China's yuan weakened against the US dollar on Friday, with strong corporate demand supporting the greenback but the Chinese currency is on course for its best week in more than a month. Prior to market opening, the People's Bank of China (PBOC) set the official yuan midpoint at its strongest in six weeks at 6.5810 per dollar. The central bank's guidance rate breached the key 6.6 level, underpinned by a robust spot yuan performance the day earlier. But traders said corporates' bargain hunting for the dollar countered the stronger midpoint.
The midpoint was 211 pips or 0.32 percent firmer than the previous fix of 6.6021 per dollar. "The yuan is becoming a fantastic benchmark for gauging US dollar sensitivity as the PBOC guidance is capturing the broader G-10 move well, as the pair took another leg lower on the back of the dovish FOMC," Stephen Innes, head of trading in Asia Pacific for OANDA said in a note on Friday.
The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 95.51, firmer than the previous day's 95.41.
The offshore yuan was trading 0.02 percent stronger than the onshore spot at 6.5877 per dollar. Offshore one-year non-deliverable forwards contracts (NDFs), considered the best available proxy for forward-looking market expectations of the yuan's value, traded at 6.7385, 2.34 percent weaker than the midpoint. One-year NDFs are settled against the midpoint, not the spot rate.
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