SHANGHAI: China's yuan slipped against the dollar on Friday as market participants locked in profits and refrained from testing highs in the Chinese currency.

But for the week, the local unit looked set for a second straight weekly gain, despite a flurry of cuts in key interest rates to help support the cooling economy.

Prior to the market opening, the People's Bank of China (PBOC) set the midpoint rate at 6.3492 per dollar, 7 pips weaker than the previous fix 6.3485.

In the spot market, the onshore yuan opened at 6.3460 per dollar and was changing hands at 6.3427 at midday, 12 pips weaker than the previous late session close.

Values have been buoyed by sustained corporate demand for the Chinese currency ahead of the long Lunar New Year holiday starting Jan. 31. But traders said some investors appeared to be reluctant to push the yuan higher as the 6.34 per dollar level provided strong resistance.

China's yuan steady on strong midpoint fixing, little impact from rate cut

The yuan is likely to consolidate on the firmer side of 6.34 per dollar before the holiday, said a trader at a foreign bank.

Separately, the country's FX regulator told a news conference on Friday that China must prevent and defuse risks of external shocks this year while strengthening macro-prudential management and guiding expectations, at a time when some countries are preparing to tighten monetary policy.

China can better "cope with external changes, and this round of tightening by the Federal Reserve may have less spillover effect than the previous round," Wang Chunying, spokesperson of the State Administration of Foreign Exchange (SAFE).

By midday, the global dollar index fell to 95.687 from the previous close of 95.735, while the offshore yuan was trading at 6.3466 per dollar.