China's yuan firmed slightly against the dollar on Tuesday, buoyed by its firmer offshore counterpart and as corporates eased off heavy dollar purchases this week. The onshore market has shown more stability, with short sellers shying away from shorting the currency since the authorities engineered a jump in offshore borrowing costs earlier this month, but traders say sentiment remains weak on views the yuan may soon resume its downward trend.
The People's Bank of China set the midpoint rate at 6.8992 per dollar prior to market open, weaker than the previous fix 6.8874.
The spot market opened at 6.9033 per dollar and was changing hands at 6.8971 at midday, 34 pips firmer than the previous late session close and only 0.03 percent softer than the midpoint.
The spread between onshore and offshore yuan has eased to near 400 pips, narrowing from around 1,000 pips in early January.
As of midday, offshore yuan was trading 0.57 percent firmer than the onshore spot at 6.8583 per dollar.
The market was also awaiting clearer direction on the yuan, ahead of a new US administration in Washington this week and with China's economic growth under greater scrutiny.
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