China's yuan inched up against the US dollar on Friday after the central bank set the midpoint at a one-week high, keeping it on course for its first week of gains in four. The dollar hovered below a 4-1/2-month high against a basket of major currencies after tepid US inflation data on Thursday led traders to pare bets of faster interest rate hikes.
The global dollar index, a gauge measuring the unit's strength against a basket of currencies, stood at 92.7 at midday, compared with Wednesday's 4-1/2-month high of 93.42. Prior to market opening, the People's Bank of China raised the official midpoint to 6.3524 per dollar, the highest since May 4, 244 pips or 0.38 percent firmer than the previous fix of 6.3768. The move in the guidance rate was the biggest one-day strengthening in percentage terms since March 27.
The firmer fixing lifted spot yuan higher. The spot market opened at 6.3372 per dollar and was changing hands at 6.3450 at midday, 10 pips firmer than the previous late session close and 0.12 percent stronger than the midpoint.
If spot yuan finishes the late night session at the midday level, it would have gained 0.24 percent to the dollar for the week - its first weekly gain in a month.
The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 98.62, firmer than the previous day's 98.58.
The offshore yuan was trading 0.12 percent firmer than the onshore spot at 6.3371 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 6.4375, 1.32 percent weaker than the midpoint.