SHANGHAI: China's yuan eased against the dollar in thin trade on Wednesday, as investors stayed on the sidelines ahead of key economic data, which will give markets a read on state of the world's second-largest economy.
Prior to market opening on Wednesday, the People's Bank of China (PBOC) set the midpoint rate at 6.7110 per dollar, 32 pips, or 0.05 percent, firmer than the previous fix of 6.7142.
Traders said both corporate clients and institutional investors are currently unwilling to bet the currency's direction and are instead awaiting fresh cues on macroeconomic data and Sino-US trade talks.
"The yuan continues to consolidate as traders sit tight ahead of the China data barrage," Stephen Innes, head of trading and market strategy at SPI Asset Management, said in a note on Wednesday.
"But in the wake of the positive shifts in last week's China PMI reading, I'm very optimistic the data will offer further assurances to markets that the global growth slowdown is bottoming which should provide a significant boost to risk assets."
China is due to release its March trade, inflation and loan growth data this week, and market participants are keen to check in on the health of the economic powerhouse.
First-quarter gross domestic product data will be published on April 17. China's economy posted its slowest growth in almost three decades in 2018.
Official data showed China's manufacturing sector unexpectedly returned to growth for the first time in four months in March.
In the spot market, onshore yuan opened at 6.7134 per dollar and was changing hands at 6.7140 at midday, 20 pips weaker than the previous late session close.
The onshore spot yuan swung in an extremely tight range of about 50 pips, similar to moves seen on Tuesday. Trading volumes stood at $13.47 billion at midday, down from a normal half-day volume of about $15 billion.
Implied volatility in yuan options, which gauges investors' expectations for swings in the dollar against the yuan, remained around multi-month lows on Wednesday.
Apart from the ongoing Sino-US trade negotiations, global trade tensions were also a key factor weighing on the foreign exchange market. Some yuan traders said fresh trade tensions between the Europe Union and the United States are also of concern as any escalation could bring volatility to major currencies.
Separately, the International Monetary Fund on Tuesday cut its global economic growth forecasts for 2019 but slightly boost its outlook for Chinese growth in part because it had expected an escalation in the US-China trade war which did not materialize.
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