SHANGHAI: China's yuan firmed against the dollar in thin trade on Wednesday, with the market's focus locked on upcoming US inflation data for clues to when the Federal Reserve might start tapering its monetary stimulus.

Dealers said the spot yuan continued to swing around the 6.4 per dollar level, with many investors taking a "wait-and-see" approach ahead of Thursday's US inflation data and European Central Bank (ECB) meeting.

In the spot market, onshore yuan opened at 6.3975 per dollar and was changing hands at 6.3949 at midday, 61 pips firmer than the previous late session close.

The spot yuan kept to tight range of about 50 pips, while trading volume shrank to $12.17 billion at midday, down from a normal half-day volume of about $15 billion.

Prior to market opening, the People's Bank of China (PBOC) set the midpoint rate at 6.3956 per dollar, 47 pips weaker than the previous fix of 6.3909.

The market barely reacted to producer price index (PPI) data showing China's factory gate prices rose at their fastest annual pace in over 12 years in May.

"The recent RMB appreciation did little to contain the surge in commodity prices as well as PPI," said Ken Cheung, chief Asian FX strategist at Mizuho Bank in Hong Kong.

"After all, it appears that the pass-through of surging PPI to CPI inflation was rather mild and gradual ... Domestically, the PBOC should have no urgency to tighten its rate hike cycle for now, given still benign CPI inflation below the annual target of around 3%."

Elsewhere, head of Russia's financial market lobby group said this week that Russia could issue OFZ government bonds denominated in Chinese yuan within two years.

By midday, the global dollar index fell to 90.085 from the previous close of 90.127, while the offshore yuan was trading at 6.3942 per dollar.