China's yuan strengthened against the dollar in post-holiday thin trade on Friday, supported by a slightly stronger official guidance rate. The Chinese currency is on course for marginal gains in the holiday-shortened week. While trading in the domestic foreign exchange markets resumed on Thursday, many market participants remained on holiday.
The dollar inched up against a basket of major currencies on Friday, trimming earlier losses, as investors gingerly dipped their toes back into riskier assets amid rapidly shifting views on US monetary policy. The global dollar index, a gauge that measures the unit's strength against six other major currencies, rose to a 10-day high of 90.235 on Thursday before its rally ran out of steam. The index stood at 89.871 as of midday.
Prior to market opening, the People's Bank of China (PBOC) set the yuan midpoint rate at 6.3482 per dollar, 48 pips or 0.08 percent firmer than the previous fix of 6.3530. In the spot market, the onshore yuan opened at 6.3490 per dollar and was changing hands at 6.3382 at midday, 183 pips firmer than the previous late session close. The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 96.96, weaker than the previous day's 97.07.
The offshore yuan was trading 0.06 percent firmer than the onshore spot at 6.3346 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 6.467, 1.84 percent weaker than the midpoint.