SHANGHAI: The yuan closed down a touch against the dollar on Friday after the People's Bank of China (PBOC) set its daily midpoint slightly weaker to reflect an overnight dollar rise in global markets.
Spot yuan closed at 6.2237 per dollar, down 0.04 percent from Thursday's close, after the PBOC set its daily midpoint 0.03 percent weaker as well.
Trading volume closed out at slightly over $10 billion, slightly below Thursday's final volume.
Despite the yuan's slight weakening, traders said the domestic market was still seeing pressure for the currency to remain strong, partly due to demand caused by the PBOC's tight liquidity policy in China's money markets.
The central bank drained a record weekly 910 billion yuan ($146 billion) from the money markets last week and refused to inject liquidity this week despite widespread expectations it would. China's benchmark money rate has surged 152 basis points from Feb. 18 to 4.43 percent by Friday.
"The foreign exchange market feels the heat of a liquidity squeeze in the money markets," said a trader at an Asian bank in Shanghai. "Tight yuan liquidity keeps the yuan under moderate appreciation pressure."
Traders expect the yuan to move between 6.22 and 6.24 in coming weeks.
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