Yuan eases to one-week low, set for 5th straight weekly loss

SHANGHAI: China's yuan slipped to a one-week low against the dollar on Friday and looked set for its fifth straight weekly losses, as rising expectations for strong US job growth lifted the greenback.

The US nonfarm payrolls report due later in the session could affect the Federal Reserve's policy trajectory to pare back stimulus earlier than expected.

The outcome was also likely to bring volatility to major currencies.

Prior to market opening, the People's Bank of China (PBOC) set the midpoint rate at 6.4712 per dollar, 3 pips weaker than the previous fix of 6.4709.

But the official fixing came in much weaker than market had expected, according to traders and analysts. It was 36 pips weaker than Reuters' estimate of 6.4676.

In the spot market, the onshore yuan opened at 6.4697 per dollar, slipped to a one-week low of 6.4789 before changing hands at 6.4772 at midday, 72 pips away from the previous late session close and 0.09 percent away from the midpoint.

If the spot yuan finishes the late night session at the midday level, it would have weakened 0.34% to the dollar for the week, posting the fifth weekly loss in a row.

Despite the recent weakness against the greenback, the yuan remains strong against a basket of currencies.

The CFETS basket index, a gauge that measures the yuan's value against its major trading partners, continued to rise on Friday to 98.21, according to Reuters calculations based on official data.

Markets widely believe authorities want to see 98 as the ceiling for the index, as a stronger reading could weigh on Chinese exports.

Several currency traders said the weaker-than-expected midpoint fixing could rein in some of the yuan's strength against the basket.

Carie Li, economist at Wing Hang Bank, said the solid CFETS index suggested China's economic fundamentals continued to support the yuan.

"With many parts of the world, including many Asian countries, suffering from the pandemic, China's relative economic advantage seems to continue to support the yuan to remain stable despite a rising dollar," Li said, expecting the yuan to trade between 6.4 and 6.5 per dollar in the near term.

By midday, the global dollar index fell to 92.559 from the previous close of 92.569, while the offshore yuan was trading at 6.481 per dollar.