SHANGHAI: China’s yuan slipped against the dollar on Thursday, as strong corporate demand onshore bolstered the dollar against growing worries in global markets over a recession in the United States.

Currency traders said FX demand for dividend payments in China picked up as some of their corporate clients need to convert yuan to dollars to pay offshore shareholders.

Overseas-listed Chinese firms typically make dividend payments during June to August, and some of this seasonal demand was delayed due to a two-month long lockdown in Shanghai which lifted on June 1.

Prior to market opening, the People’s Bank of China (PBOC) set the midpoint rate at 6.7079 per dollar, 30 pips firmer than the previous fix 6.7109.

In the spot market, onshore yuan opened at 6.7050 per dollar and was changing hands at 6.7103 at midday, 83 pips weaker than the previous late session close.

The global dollar index eased to 104.159 by midday from the previous close of 104.197. Traders said pressure on the yuan from corporate dollar demand was slightly alleviated by a weaker greenback in morning trade after the Federal Reserve Chair Jerome Powell told US lawmakers that a recession was “certainly a possibility”.

Powell told the Senate that the US central bank was not trying to engineer a recession to stop inflation but was fully committed to bringing prices under control even if doing so risks an economic downturn.

“Despite the possibility of recession, the Fed is unlikely to halt its tightening cycle abruptly in the near term when US inflation remains uncomfortably elevated,” said Ken Cheung, chief Asian FX strategist at Mizuho Bank.

Separately, China’s President Xi Jinping called on Wednesday for solidarity and cooperation to support a global economic recovery threatened by an epidemic and security challenges.