SHANGHAI: The yuan fell slightly on Thursday after the People's Bank of China (PBOC) set a lower midpoint, as traders awaited comments from the European Central Bank (ECB) which is widely expected to cut interest rates later in the day.
Before trading began, the PBOC set its daily midpoint 72 pips weaker at 6.3193 following a drop in the euro to a one-week low.
"Spot yuan trading is quiet. The market is waiting for the ECB," said a dealer at a Chinese commercial bank in Shanghai.
The ECB is due to announce its decision at 1145 GMT, followed by a news conference at 1230 GMT. A Reuters poll of economists showed the majority expect the ECB to cut its main rate by 25 basis points to 0.75 percent. They were evenly split on whether the ECB will lower its deposit rate.
The yuan traded at 6.3532 around midday, 55 pips weaker than Wednesday's close.
The yuan's outlook for the third quarter will largely depend on developments in the euro zone and other global economic factors affecting the dollar, traders said.
But they generally believe that absent any external shocks, the yuan could still remain in the 6.34-6.37 per dollar range during the period as the central bank has no intention to let the yuan depreciate excessively.
The yuan suffered its weakest quarter on record in the second quarter, falling 0.9 percent. But traders said they saw signs of central bank intervention last week to strengthen the yuan when it approached 6.37.
Offshore, one-year non-deliverable forwards (NDFs) were bid at 6.4000 and offshore deliverables of the same tenor traded at 6.4323 by midday.
Offshore spot yuan was at 6.3525 per dollar, near the level of onshore spot yuan.
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