SHANGHAI: China's yuan eased from a 10-day high in thin trade on Wednesday as investors unwound long positions in the local currency to avoid fluctuations heading during the Lunar New Year break.

Traders said corporate clients had already converted most of their dollar receipts into yuan while most market participants had squared their books and refrained from holding large yuan amounts during the long holiday period.

Chinese financial markets close on Thursday with trade resuming on Feb. 18.Prior to the market opening, the People's Bank of China (PBOC) set the midpoint rate at a near 32-month high of 6.4391 per dollar, 142 pips, or 0.22% firmer than the previous fix of 6.4533.

In the spot market, the onshore yuan opened at 6.4400 per dollar and was changing hands at 6.4377 at midday, weaker than the 10-day high of 6.4333 hit a day earlier.

Several traders said they continued to see state-run banks purchasing small amounts of dollars in onshore spot market to rein in the strength in the local currency.

Similarly, those big banks were seen buying greenbacks to offset seasonal corporate dollar selling at 6.46 per dollar last week.

Traders and analysts interpreted those moves as a sign that the authorities were unwilling to see too rapid gains in the yuan.

Separately, the market had little reaction to economic data that showed consumer prices unexpectedly slipping into deflation last month and bank loans surging to a record high.

"With vaccines gaining traction, we expect the PBOC to start to pare back its credit-fueled stimulus efforts," Win Thin, global head of currency strategy at Brown Brothers Harriman, said in a note.

"The bank should also continue its policy of allowing the yuan to appreciate and gently curbing credit to system, especially when directed towards real-estate and financial assets."

By midday, the global dollar index fell to 90.397, while the offshore yuan was trading at 6.4243 per dollar.