SHANGHAI: China's yuan gave up small early gains to ease against the dollar on Thursday, as traders awaited the US Federal Reserve's upcoming policy meeting for more clues on tapering.
The People's Bank of China set the midpoint rate at 6.433 per dollar prior to market open, the highest level since June 17 and firmer than the previous fix of 6.4492.
In the spot market, the yuan opened at 6.4332 per dollar and rose to as high as 6.4297 in morning trading before softening to 6.4348 at midday, 18 pips weaker from the previous late session close.
The yuan could be getting a lift after softer-than-expected US inflation data eased short-term expectations about US tapering, said a trader at a foreign bank, while the first call between US President Joe Biden and Chinese leader Xi Jinping in seven months fuelled some optimism that tensions between the two powerhouses may ease.
In other news, China's central bank and the Hong Kong Monetary Authority said on Wednesday the "Southbound" leg of the Bond Connect channel would be launch on Sept. 24, making it easier for investors to trade offshore debt from next week.
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"The open-up of another outbound investment channel could fuel capital outflow pressure but it seems not to be case for now as RMB sentiment remains steady in the trust of (the) PBoC's capability to defend the currency," said Ken Cheung, chief Asian FX strategist at Mizuho Bank in a note.
Traders are awaiting the Federal Open Market Committee's (FOMC) policy meeting next week for indications on when the central bank will start to taper stimulus.
Tapering means the central bank will be buying fewer debt assets, in effect reducing the amount of dollars in circulation.
The global dollar index rose to 92.529 from the previous close of 92.462. The offshore yuan was trading 0.04 percent away from the onshore spot at 6.4321 per dollar.
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