SHANGHAI: China's yuan was little changed against the dollar on Tuesday, with dollar supply and demand roughly in balance while the central bank set an official midpoint almost flat.
The balance helped offset the impact of another rally in the US currency in global markets, traders said.
The People's Bank of China (PBOC) set the midpoint rate at 6.1572 per dollar prior to market open, moderately weaker than the previous fix of 6.1563.
Spot yuan opened at 6.2640 per dollar and was changing hands at 6.2639 at midday, 5 pips weaker than the previous close and 1.73 percent away from the midpoint. The spot rate is currently allowed to trade with a range 2 percent above or below the official fixing on any given day.
Traders said dollar demand was strong in the Chinese market, partly driven by the greenback's continuous bull run since the middle of last year, but the demand had largely been offset by heavy inflows from China's repeated record high trade surpluses.
Data on Tuesday showed China's annual consumer inflation recovered in February, exceeding expectations, but producer prices continued to slide, underscoring deepening weakness in the economy and deflationary risks.
The data had no immediate impact on the market, traders said, adding, however, that if China's economy was persistently faced downward pressure and the U.S economy continued to recover, pushing the Federal Reserves to hike interest rates, the yuan would face greater depreciation pressure.
The yuan, which hit its trough since October 2012 last week, has so far fallen 1 percent this year after a 2.4-percent slump in 2014, its first significant annual depreciation since 1994.
The depreciation runs contrary to an urge by US critics that China should let the yuan appreciate to balance bilateral trade between the world's two largest economies.
Nathan Sheets, US Treasury's Undersecretary for International Affairs and America's top financial diplomat, on Monday called on China to more swiftly adopt policy changes that would allow market forces to determine the value of its currency.
The comments came even after Sheets acknowledged last month that China had apparently stopped intervening in exchange markets to weaken its currency since July.
On Tuesday, the offshore yuan was trading 0.21 percent weaker than the onshore spot at 6.277 per dollar.
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