SHANGHAI: China's yuan was largely flat against the dollar on Thursday, dampened by weaker-than-expected guidance from the central bank and in spite of the market's improved appetite for risk assets.

The safe-haven dollar languished near an almost one-week low against its major peers as investors adopted a more optimistic stance about the global economic outlook, despite the rapid spread of the Omicron coronavirus variant.

In line with weakness in the greenback, the People's Bank of China (PBOC) set the midpoint rate at a near one-week high of 6.3651 per dollar prior to market open. But the fixing was 81 pips softer than Reuters' estimate of 6.3570.

The official fixings have come in weaker than market expectations since mid-November, with traders and analysts interpreting them as a sign to discourage one-way bets on yuan appreciation.

The onshore yuan opened at 6.3698 per dollar and was changing hands at 6.3708 at midday, 8 pips weaker than the previous late session close.

The spot rate hovered in a tight range of less than 60 pips. With many market participants already away for their year-end holidays, trading was slow on Thursday morning, said a trader at a Chinese bank.

A slew of recent PBOC actions including persistently weaker-than-expected midpoint fixings, higher net FX purchases from banks and a hike in banks' FX reserve requirement ratio all suggested the authorities have started to be uncomfortable with sustained yuan strength.

"Now though, the PBOC appears to want its efforts to stem the renminbi's strength to be known," economists at Capital Economics said in a note.

"We think it will get its way, and expect the renminbi to weaken from 6.37 (yuan per dollar) now to 6.90 at the end of next year."

By midday, the broad dollar index fell to 96.039 from the previous close of 96.11, while the offshore yuan was trading at 6.3758 per dollar.