China's yuan firmed against the dollar on Monday, after the central bank set a stronger midpoint and the greenback dipped, but gains were capped by some corporate dollar purchases. The People's Bank of China set the midpoint rate at 6.8790 per dollar prior to market open, firmer than the previous fix 6.8896.
The spot market opened at 6.8942 per dollar and was changing hands at 6.8944 by midday, 46 pips firmer than the previous late session close but 0.22 percent weaker than the midpoint.
The spot yuan weakened around 0.4 percent to the dollar last week, but the latest China Foreign Exchange Trade System (CFETS) data showed that the index for the yuan's value based on the market's trade-weighted basket rose around 0.5 percent to 94.28 on Friday compared with a week earlier.
The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 95.17, weaker than the previous day's 95.32.
The global dollar index fell to 101.45 from the previous close of 101.54.
The offshore yuan was trading 0.02 percent firmer than the onshore spot at 6.8938 per dollar. Offshore one-year non-deliverable forwards contracts (NDFs), considered the best available proxy for forward-looking market expectations of the yuan's value, traded at 7.1215, 3.41 percent weaker than the midpoint.
One-year NDFs are settled against the midpoint, not the spot rate.
The dollar slipped as investors locked in profits following Federal Reserve Chair Janet Yellen's speech on Friday saying the central bank is set to raise rates later this month as long as economic data on jobs and inflation holds up, cementing market views of a likely hike at its March 14-15 meeting.
"The March rate hike will have limited impact on the market from now on as the news has been digested," said a trader at a foreign bank, adding the key factor influencing the global forex market would be comments made by US President Donald Trump.
Traders said the yuan breaching the psychologically important 6.9 per dollar level on Friday had re-ignited some depreciation expectations, which triggered corporate dollar purchases on Monday morning.