Yuan softens slightly on yen recovery, volumes moderate

Traders said the central bank had intervened to keep the yuan low last week, disregarding a softening trend in the dollar index, in order to counter moves by some other Asian central banks to weaken their currencies.

However, the yen bounced back from a 2-1/2 year low against the dollar on Monday as option-related buying prompted short-term players to give up a further test of the yen's downside for now.

Central bank intervention in the Chinese forex market is always difficult to prove, but traders say unusually heavy trading volumes - like the $22 billion posted on Friday - often indicate the influence of the People's Bank of China (PBOC) in the market.

Transaction volumes moderated during the Monday morning session, standing at slightly more than $6 billion by midday.

Volumes are usually muted in the week leading to the Chinese Spring Festival, which will see mainland markets close from Feb. 11 through February 15.