SHANGHAI: China's yuan edged down against the dollar on Wednesday, approaching its lowest reading since early 2011, after the central bank weakened the midpoint for a third straight session to a new five-year low amid further greenback strength.
The dollar index that tracks the greenback against a basket of major currencies gained 0.4 percent on Tuesday and retained its gains, standing at 95.835 around midday, buoyed by expectations of a near-term US interest rate hike.
The People's Bank of China set the midpoint rate at 6.5889 per dollar prior to market open, 0.15 percent weaker than the previous fix 6.579 and within market expectations.
"It's true that overall market sentiment is a bit panicky right now but the mood is not reflected in the deals we strike," said a trader at a Chinese commercial bank in Shanghai.
"The authorities have been checking every dollar purchase to make sure no speculative bets are in the market."
Spot yuan opened at 6.5840 per dollar and was changing hands at 6.5940 at midday, 0.24 percent weaker than the previous close. The spot rate came within a whisker of its January trough of 6.5956, which was the softest level since February 2011.
Traders also reported robust dollar demand from corporations in the morning trade while the central bank was believed to have stayed on the sidelines.
The latest China Foreign Exchange Trade System (CFETS) data showed that the index for the yuan's value based on the market's trade-weighted basket stood at 97.15 at the end of May, up 0.03 percent for the month.
On Wednesday, activity in China's manufacturing sector unexpectedly expanded for the third straight month in May but growth remained weak as orders softened, suggesting the world's second-largest economy is still struggling to regain traction.
Traders said the news had almost no impact on the country's foreign exchange market.
The offshore yuan was trading 0.07 percent softer than the onshore spot at 6.5984 per dollar.
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