SHANGHAI: China's yuan firmed against the dollar on Friday after the central bank set a marginally stronger midpoint, leaving the currency little changed on the week.
Traders said they suspected the central bank had moved to support the yuan this week as the currency appeared under pressure of depreciation because of the dollar's strength in global markets, China's slowing economic growth and signs of capital outflows from the country.
Spot yuan stood at 6.1381 per dollar by midday, up 0.04 percent from Thursday's close, after the People's Bank of China (PBOC) set its official midpoint at 6.1455, or 0.06 percent firmer from Thursday's close.
"We believe the central bank stepped in the market to defend the yuan's value after the Fed statement this week," said a trader at an Asian bank in Shanghai.
The US Federal Reserve on Wednesday renewed its pledge to keep interest rates near zero for a "considerable time", signalling the global strength of dollar may linger in the near term.
Some traders said weak sentiment towards the yuan prevailed as both domestic and international investors are concerned about the health of the world's second-largest economy after August data pointed to further softness.
"It is now necessary for the central bank to take some measures to keep the currency stabilising," said a trader at a European bank in Shanghai.
Therefore, traders forecast the yuan will move in the range of 6.13-6.15 in the near term until China's economic picture brightens.
SIGNS OF CAPITAL OUTFLOWS
The current economic downtrend has also influenced the country's cross-border capital flows.
China's central bank and commercial banks sold 31.1 billion yuan ($5 billion) worth of foreign exchange on a net basis in August, according to a Reuters calculation based on central bank data released on Monday.
The sales came after China reported a record high foreign trade surplus in August, signalling possible capital outflows from China, traders said.
Growth fears have deterred capital inflows into China, a research note by Bank of Communications said.
However, Shen Danyang, China's trade ministry spokesman, said on Tuesday that China saw no obvious outflows of foreign capital.
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