SHANGHAI: China’s yuan weakened to a one-week low on Friday as the dollar firmed and on rising market expectations of imminent monetary easing to boost sputtering activity in the world’s second-largest economy.

Prior to the market opening, the People’s Bank of China (PBOC) set the midpoint rate, around which the yuan is allowed to trade in a 2% band, at 7.1771 per dollar, 1 pip firmer than the previous fix 7.1772.

The official midpoint fixing continued to come in stronger than market projections, traders and analysts said, interpreting it as an official attempt to rein in excess yuan weakness.

Friday’s guidance rate was 1,192 pips stronger than Reuters estimate of 7.2963.

The spot yuan opened at 7.2850 per dollar and fell to a low of 7.2925 at one point, the softest level since Nov.3. By midday, it was changing hands at 7.2923, 83 pips weaker than the previous late session close.

Falling consumer prices in October call for more policy stimulus, at a time when China’s newly approved 1 trillion yuan of sovereign bond issuance has also raised hopes for more liquidity support, market watchers said.

“We continue to expect a 25-basis-point reserve requirement ratio (RRR) cut in the rest of the year for liquidity support while a rate cut could be less likely,” Citi analysts said in a note.

“The central bank could be in a difficult situation, with domestically low inflation and concerns on the exchange rate, as well as risk resolution tasks for real estate and local government debt.”

The interest rate on one-year AAA-rating negotiable certificates of deposit (NCDs), which measure the short-term inter-bank borrowing costs, rose to a near seven-month high of 2.5942%, more than 9 basis points higher than the medium-term policy rate that the central bank charges financial institutions.