SHANGHAI: China's yuan weakened slightly against the US dollar on Thursday amid a global equity sell-off that shrank risk appetites.
But analysts said the slip may have been capped by signs Beijing is tapping the brakes on outbound investment.
On Wednesday, sources told Reuters China is suspending approvals for a niche overseas investment product in Shanghai known as the QDLP scheme. Regulators have also halted issuing quotas under another outbound channel, the QDII, since July.
"There are few signs yet of individuals scrambling to buy dollars, as the government has put in place strict capital control measures," said a forex trader at a Chinese lender in Shanghai.
On Thursday, the global dollar index slipped to 95.241 from the previous close of 95.508.
Prior to market open, the People's Bank of China set the midpoint rate at 6.9098 per dollar, weaker than the previous fix of 6.9072.
The spot market opened at 6.9307 per dollar and was changing hands at 6.9306 at midday, 66 pips weaker from the previous late session close and 0.30 percent away from the midpoint.
Ken Cheung, senior Asian FX Strategist at Mizuho Bank Ltd, attributed yuan's weakness on Thursday to the risk-off mood dominating global markets, as well as elevated China-US tensions.
"The immediate catalyst could be China being labeled as a currency manipulator in the upcoming US Treasury's Semi-Annual Currency Report due next week," he said in a note to clients.
The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 92.69, weaker than the previous day's 93.
The global dollar index fell to 95.232 from the previous close of 95.508.
The offshore yuan was trading -0.15 percent away from the onshore spot at 6.9407 per dollar.
Offshore one-year non-deliverable forwards contracts (NDFs), considered the best available proxy for forward-looking market expectations of the yuan's value, traded at 7.0452, 1.92 percent away from the midpoint.
One-year NDFs are settled against the midpoint, not the spot rate.
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